"There is no possibility to restore
8 million jobs lost in the Great Recession.
We inherited a godawful mess. [There is] no
way to regenerate $3 trillion that was lost,
not misplaced, lost." -- US
Vice President Joseph Biden

"The economy is still in the gravitational
pull of the Great Recession. All the booster
rockets for getting us beyond it are failing.
Home sales are down. Retail sales are down.
Factory orders in May suffered their biggest
tumble since March of last year. So what are
we doing about it? Less than nothing."
-- Robert Reich (Labor Secy in Clinton Admin)

"There is nothing like deflation to
bring on hyper-inflation. Governments desperate
to prop up prices and economies, despite being
broke, print reams of money, money that eventually
enters the market in a rush, flipping deflation
to inflation." -- Merryn Somerset Webb
(editor of MoneyWeek)

"The housing market is stabilizing.
It will come back as markets do. It will take
time for housing to straighten itself out."
-- Thomas Hoenig (Kansas City Fed President)

MISCELLANEOUS
MORSELS

◄$$$ EQUITY OUTFLOWS WERE HUGE IN JUNE,
A CONTINUING TREND. FUNDS ARE DEPARTING THE
U.S. FRAMEWORK, SEEKING VALUE
AND SAFETY ELSEWHERE. HIGH FREQUENCY TRADING
DETAILS READ LIKE A STRANGE NOVEL BOUND IN INTRIGUE
WITH LITTLE OR NO REALITY. THE HIGH FREQUENCY
ALGORITHMS ARE DOMINATING MOST ACTIVITY, CONFIRMING
THE EXIT BY HUMANS, EXPOSING A FRAUD-RIDDEN
CORE. $$$

The stock indexes are a distraction from reality
nowadays. The Lipper/AMG fund flow data reported
$11.6 billion in equity fund outflows, for the
week ended July 7th. The Dow surged by around
500 points in four days as Europe
sniffed some relief and resolution on sovereign
debt. Stocks have made decent upmoves even as
mutual funds suffered the biggest weekly outflows
in 2010. One favored alternative is investment
grade corporate bonds, enjoying inflows of $896
million on the week. Money market funds saw
their biggest inflow in 2010, at $18.5 billion.
See the Zero Hedge article (CLICK HERE)
complete with some sass.

Trading volume has become concentrated in fewer
and fewer stocks, as the claim of a broad equilibrium
based market has turned into a absurdity. A
liquidity analysis by Abel-Noser indicates that
the US
stock market has now become a concentrated pool
in which the top 99 stocks account for 50.1%
of total domestic trading volume. In June,
the top 20 stocks accounted for a record 28.9%
of all domestic volume. The High Frequency Trading
algorithms trade fewer stocks with each passing
week as firms try to corner only the most liquid
stocks. In the process they drive out the actual
investors, and slowly ruin the stock market.
The fraudulent core is exposed as a fast spinning
orb. Not a surprising statistic, the top 978
stock issues account for 90.0% of total domestic
volume, while the remaining 17,597 account for
just 10% of all trades on a value basis. The
leading 5 stocks and their June domestic volume
ratios were: SPY (10.5%), Apple Computer (AAPL:
2.84%), Barclays Global iShares (IWM: 1.92%),
QQQQ (1.71%), and British Petroleum (BP: 1.39%).
The former HFT darlings, are Citigroup (C) and
Bank of America (BAC) which managed to remain
barely in the top 10. See the Zero Hedge article
(CLICK HERE).

◄$$$ THE PLUNGE PROTECTION TEAM USED
BY THE USGOVT AND WALL STREET WAS MENTIONED ON C.N.B.C. OPENLY, WITH A MINOR AMOUNT OF
DEBATE. THE ARENAS ARE WELL AWARE, BUT NOT THE
PUBLIC, STILL A FACTOR SHIELDED BY THE PRESS.
$$$

A CNBC guest claimed that without the Plunge
Protection Team actions, the stock market would
fall badly. The props are that necessary. The
network anchor team disagreed in feeble fashion.
Guest Damon Vickers of Nine Points Capital had
an unexpected moment of frank discussion that
took the lead financial network off guard. He
said, "Unless the Plunge Protection
Team comes in over the next couple of days,
the markets are looking very dicey here."The stand-in clown Joe Kernan, the jocular
figure rarely with much intelligent to add,
asked if Vickers was joking about the PPT. The
response from Vickers was, "Absolutely
not. It is common knowledge that the government
steps in and does things to step on the gas
and buy stock here and there." Even
toady guest on the CNBC set Byron Wien showed
umbrage with a pithy denial. The PPT is using
any hint of decent economic news to trample
the shorts into a forced cover of positions,
which means almost no new funds enter the stock
market. See the Zero Hedge article and the brief
video clip (CLICK HERE).
The CNBC crew is either deeply ignorant, incredibly
naive, thrives on lies, or well paid to deceive.
Personally, their greatest value comes with
the sound off, as my preference is to gaze at
the Aussie Sheila named Mandy during deep thought
and telephone conversations. She has plenty
intelligent to say too, unlike most of the American
cast in the fictional production laced with
occasional comedy.

◄$$$ TAX HIKES ARE SOON TO KICK IN FOR
AMERICANS. PEOPLE WILL BE SLAMMED AND SHOCKED.
MAYBE THE CAPPER WILL BE THE HOME INSPECTION
TAX FROM THE PROPOSED CAP & TRADE SHAM IF
THAT DEEP CON LEGISLATION EVER PASSES. $$$

After nearly a decade of federal tax cuts treated
by the Republican wing of the political cabal,
Americans could awaken New Year's Day with a
nasty hangover treat from the Democrat wing
of the political cabal. Numerous tax breaks
linked to child tax credits and the death tax
are due to expire then. Higher tax bills will
be the new norm for nearly every American citizen.
Scott Hodge is president of The Tax Foundation.
He said, "We have never in history seen
anything quite like this, where such a major
portion of the tax code is set to expire on
a single date and affect so many Americans all
at once." Consider it change you can
believe in. Phase-out would trigger tax increases
for small businesses. Two thirds of small businesses
are taxed at the top rate, set to move to 39.6%
from 35% currently. Obama ran on campaign promises
not to raise taxes, but is doing the opposite.
One is hard pressed to find a single campaign
promise honored by the man, mainly financial
disclosure, tax relief, and the war cutback.
The public is deeply concerned about deep deficit
spending, and the prospect of not digging out
of the debt hole. Federal spending is out of
control, unsustainable, and could destroy the
nation. Actually, it will likely destroy the
USDollar via global abandonment as creditors
observe the threat to their debt securities
holdings. Typical Americans are soon to suffer
shock, many frozen in action, unsure how to
proceed with spending and investments. See the
Pittsburgh Live article (CLICK HERE).
My political overview is simple, that the Left
and the Right represent mere jacket color differences
to the syndicate. Anyone who expects change
for the better from a jacket change after four
years is a moron deserving of residence in a
Third World nation, stripped
of wealth. Jacket changes mean different committe
heads, like flipping chapters in a tragedy.

Details can be cited. Broad tax cuts enacted
in 2001 and 2003 will expire unless the USCongress
extends them. President Obama has proposed extending
some tax breaks, like for couples with under
$250k in annual combined income. The Tax Foundation
produced analysis that includes summary items.
Married couples with two children and a $50k
income would face income tax due to triple to
$2825 a year, while a married couple with no
children earning $1 million would face an increase
in income tax of $44k per year, to reach a total
bill of $298,510. The impact will be felt immediately
in the first paycheck in 2011, sure to cause
a public outcry. Some summary items:

Across the board income tax increases of
3% to 5% for every bracket

The so-called death tax on estates would
return after a one-year hiatus, at 55% on
estates over $1 million

Capital gains tax would rise to 20% from
15%, and dividends tax would rise to 39.6%
from 15%

The child tax credit would be cut in half
to $500 per child.

In particular, health care costs are due to
rise fast, very fast. Welcome to the National
Health Care Project, where cost of care for
the uninsured and poor will fall on the general
public. Subscriber BenR in North Carolina wrote, "In speaking with Health Insurance agencies
that I am contracted to sell through, effective
January 1st of 2011, everyone's Individual Health
Insurance will be going up three times the premium.
So, if a family is currently paying $420 a month,
their new premium will be approximately $1260
a month." Remember the defensive cry
by the Obama Admin proponents, that the program
will pay for itself. There is nothing like a
big hefty tax hike during an endless recession
to prick the public. Retail analyst Howard Davidowitz
argues that new regulations governing loans
to small businesses are only making matters
worse, which will result in community banks
packing up and quitting, in his words. Over
500 new financial regulations are set to hit
the system, owing principally to the highly
confusing Health Care Program thrust upon people
and businesses. Many businesses are frozen in
inaction (expansion, hiring) due to the blitz
of regulatory and taxation changes, as uncertainty
is the new norm. My view is a firm one, convinced
from the start that Obama's objective has been
to destroy the USDollar and USEconomy so that
martial law can be imposed, a backdoor marxism
path. While Bush II seemed corrupt, but Obama
seems amateurish.

The American public is fed a constant stream
of spin, myths, and utter lies about both the
condition of the USEconomy and official actions
to improve it. Informed decisions are a major
challenge in the current climate. Some things
are certain. Tax hikes are coming. The Gulf
of Mexico is a mess. Almost every state is dead
broke. Banks are not lending. Credit cards are
as if from loan sharks. Regulations in the US are cumbersome. Corporations still look to
exit the US
in favor of foreign locales. And lastly, much
of the USGovt stimulus aid foreign economies
more than the USEconomy, a sick byproduct of
mind-numbing structural imbalances. Recall that
Third World nations lack
an adequate industrial base, and that is the
imbalance referred to.

◄$$$ MEDIA OWNERSHIP CONCENTRATION HAS
RESULTED IN A STRANGULATION OF THE FREE PRESS
AND A DIM OF THE BRIGHT LIGHT IN ITS PROMISE.
THE UNITED STATES HAS THIRD WORLD PRESS NETWORKS.
$$$

Harken back to 1983. At the time, Ben Bagdikian
was labeled an alarmist in his book, "The
Media Monopoly" concerning concentrated
power. He cited how 50 corporations in 1983
controlled the vast majority of all news media
in the United States. In his 4th
edition, published in 1992, he wrote "In
the US,
fewer than two dozen of these extraordinary
creatures own and operate 90% of the mass media."
The group controlled almost all of America's newspapers, magazines, TV & radio
stations, books, records, movies, videos, wire
services, and photo agencies. Bagdikian predicted
the oligoply would over time consolidate to
about half a dozen companies, a call greeted
with skepticism at the time. When the 6th
edition of "The Media Monopoly"
was published in 2000, the number within the
oligopoly had fallen to six, precisely as warned.
In 2004, Bagdikian's revised and expanded book
entitled "The New Media Monopoly"
demonstrates that only 5 huge corporations,
Time Warner, Disney, News Corporation (Murdoch),
Bertelsmann (in Germany),
and Viacom (formerly CBS), now control the great
majority of the media industry in the United
States. The conglomerate
of NBC by General Electric aspires to join the
control center, but surely has a strong niche.

The trend of consolidation and merger has worked
to ruin the US Press objectivity, thus rendering
it vulnerable to control by powerful groups
putting to work important agendas. Anyone who
denies that big bankers are involved on media
firm Boards of Directors is just plain ignorant.
My view is that mergers should be banned
in the press & media. Let dying firms
die and permit new firms to spring up. Bigger
media firms promote the big corporation agenda,
and with the Fascist Business Model instituting
a corporate & state merger, that agenda
is the opposite of populist.

THE SORDID
BANKERS

◄$$$ DEBT VALUATION ADJUSTMENTS HAVE
MADE A COMEBACK AS AN EXTREME ACCOUNTING FRAUD
DEVICE TO PUSH UP BANK PROFITS. INSTEAD OF BOOKING
A LOSS WHEN CERTAIN BONDS FALL IN VALUE, THE
BANKS ARE BOOKING AN EQUAL GAIN. MUCH OF THIS
YEAR'S PROFITS ARE TIED TO THIS FRAUDULENT PRACTICE.
SIMPLE VOODOO, TYPICAL OF ENGRAINED ENDORSED
AMERICAN FRAUD. $$$

Bank of America and Wall Street have resorted
to an accounting fraud technique that was critical
over a year ago. BOA will record a $1 billion
gain in 2Q2010 from writing down its debts to
their market value, so-called debt valuation
adjustments. Morgan Stanley also recorded
around $1 billion in the same fraudulent gimmick
in Q2. In fact Citigroup confirms the method,
from a report by analyst Keith Horowitz. Almost
20% of BOA pre-tax income and 60% of Morgan's
pre-tax income came from a nifty FASB endorsed
accounting rule that allows banks to book profits
when the value of their own bonds falls. It
is called Statement 159, an accounting rule
adopted by the Financial Accounting Standards
Board in 2007, which allows banks to book profits
when the value of their bonds falls from par.
The backward accounting gimmick is back in
vogue, an utter abomination. Fluctuations
in the value of the debt do not change the amount
the banks owe, yet they book a profit. In the
past, writing down impaired assets involved
booking a loss, honest accounting. This is typical
of US banking, pure fraud, endorsed fraud. Counting
GSax and JPMorgan, the four banks exploited
the rule to account for a bogus 18% of profits.
Even Citigroup could have booked $400 million
under the accounting rule, estimated Bank of
America analyst Guy Moszkowski. These fraud
kings are observing each other's fraud with
surprising precision. If only they would slip
and comment on their narcotics money laundering
from the CIA. A footnote, the BOA credit derivatives
rose by 34% in Q2, a favorable nether wind from
the European sovereign debt chaos. Morgan Stanley's
doubled in value and those held by Goldman Sachs
Group jumped 86% in value. See the Bloomberg
article (CLICK HERE).

◄$$$ GOLDMAN SACHS VICE PRESIDENT PERJURED
HIMSELF WHEN DENYING THE FIRM'S ABILITY TO PROPERLY
ACCOUNT FOR DERIVATIVES TRADING. $$$

The Goldman Sachs Chief Financial Officer David
Viniar testified before a USCongressional panel
that the financial firm (bank holding company,
syndicate nexus) could not effectively separate
its derivatives data from trading in cash securities.
He said, "We do not have a separate
derivatives business. It is integrated into
the rest of our business." Of course
it can be separated, especially with their sophisticated
computer equipment and advanced software. As
a colleague mentioned, "It would be
truly amazing that GS does not track the trading
of each individual trader, certainly for performance
if not bonus reasons. Structured product traders
do not trade cash securities. Viniar's testimony
is so false, it smells all the way around the
world." See the Bloomberg article (CLICK
HERE).

Bill Gates of Microsoft once was on a flight
sitting next to a Forbes Magazine editor years
ago. The editor related a comment made by Gates
during the long trip. Gates admitted that the
#1 competitor for Microsoft in recruiting the
best talent for employment came from Goldman
Sachs. Of course GSax can separate the data,
if they can defraud so effectively, if they
can monitor NYSE trades before they occur so
effectively. By the way, a requirement for elevation
to VP at GSax, a rite of passage, is a major
fraud that eluded the legal authorities, much
like a murder to the mafia rite of passage.

◄$$$ WELLS FARGO
WAS INVOLVED IN MEXICAN DRUG MONEY LAUNDERING,
WAS CAUGHT, BUT WILL NOT SUFFER MUCH IN CONSEQUENCES.
THE IMPACT IS SIMPLY A MINOR COST OF DOING BUSINESS,
A BOOKED ENTRY. $$$

Wachovia is hip deep (more then knee deep)
in Mexican druglord money laundering schemes.
Wells Fargo has adopted the messy business through
bank merger, which has big payoffs of 25% to
40% cuts, depending on the relationship. The
cost to the established big bank is a slap on
the wrist and a fine, no big deal. Minor players
would serve jail time, fork over huge sums of
money, and even suffer RICO asset seizures,
but not the syndicate. The method of money transport
has been DC-9 aircraft like the ones used in
April 2006 at the international airport in the
port of Ciudad del Carmen, 500 miles east of
Mexico
City. It carried 128 black suitcases, packed
with 5.7 tons of cocaine, valued at $100 million.
The stash was interrupted on a delivery run
from Caracas Venezuela
to drug traffickers near Mexico
City. Worse, and revealing the tight relationship
with Wachovia and Bank of America, the smugglers
had purchased the big aircraft with laundered
funds they transferred through US facilities
at the two big US banks. The story was covered by Bloomberg Markets
magazine in its August 2010 issue.

The incident was admittedly not isolated. The
admissions were made publicly before the US
courts, which enforce little if anything with
teeth. Wells Fargo admitted in court of failed
monitoring to report suspected money laundering
by narcotics traffickers, including the cash
used to acquire four airplanes used to ship
a total of 22 tons of cocaine. Wachovia admitted
inability to spot illicit funds in handling
$378.4 billion in cash from Mexican currency
exchange houses from 2004 to 2007. Know
it to be the largest violation of the Bank Secrecy
Act in US
history, making a mockery of the anti money
laundering law. That is like not noticing an
elephant trample through your living room at
the dinner hour every day, every week, for four
years. Of course, they knew. The 1970 Bank Secrecy
Act requires banks to report all cash transactions
above $10,000 to regulators and to inform the
USGovt about any suspicious movement of funds.

No big US bank has ever been indicted for violating the
Bank Secrecy Act or any other federal law.
That fact is the clincher on syndicate participation,
collusion, and oversight. Instead, the USDept
Justice settles criminal charges by using deferred
prosecution agreements, in which a bank pays
a fine and promises not to break the law again.
Chalk it up a business cost, at a fraction of
the profit from the continued practice. What
a cozy deal!! In the view of many analysts,
the Too Big To Fail syndrome is an important
factor. Indictment of a big bank could trigger
a bank run by investors, wreck legitimate depositors,
render deep damage to shareholders, and even
cause panic in financial markets. The result
is carte blanche for bank crimes. In practice,
no capacity to regulate or punish the big banks
exists, none. See the Global Economic Analysis
article (CLICK HERE).
The big US
banks are integrated parts of the financial
crime syndicate that extends widely, even to
military contractor fraud. Be sure that US bank money laundering for narcotics is not
limited to Mexican operations, but the USMilitary
operations are better protected using military
contractors and CIA equipment.

◄$$$ ROBERT RUBIN IS THE UBER-MEISTER
OF USGOVT FINANCIAL MINISTRIES, IN FULL CONTROL
THROUGH SURROGATES LIKE GEITHNER. WHEN RUIN
IS THE BYPRODUCT DURING A SYNDICATE ERA, TOTAL
CONTROL IS THE REWARD. GEITHNER WAS SELECTED
FOR HIS MEDIOCRITY AND THE ABILITY TO CONTROL
HIM LIKE A PUPPET. POLICY IS MADE BY RUBIN.
$$$

Robert Rubin was one of history's best currency
masters at Goldman Sachs. He went on to serve
as Treasury Secy in the Clinton Admin, where
he assisted Wall Street firms in leasing gold
at almost zero cost, dumping the national treasury,
suppressing the gold price for a decade, and
enjoying obscene profits. He went on from there
to Citigroup, where overly ambitious sights
attempted to create a bank, brokerage, and insurance
giant, except that it went broke in a tremendous
failure. A fine resume item by Rubin was the
theft of the multi-$billion Native American
funds with USGovt and Wall Street collusion.
Rubin has moved on to the circus role of managing
his malleable puppet Tim Geithner as Treasury
Secy, after pushing the mediocre fellow for
the job. His resume would best be described
for treason charges, not a role of Rasputin
in trust. The photo sizes are proportional to
their stature.

Chris Whalen is a highly respected independent
minded fellow. The founder and managing director
at Institutional Risk Analytics believes Robert
Rubin still pulls the strings in USGovt finance
ministry policy, even runs the economic policy
in the Obama Admin from behind the scenes through
his many surrogates. Leading among them is Geithner.
Whalen said, "It comes as a surprise
to many people that, despite the fiasco at
Citigroup and his role in causing the subprime
mess, Rubin remains inside the circle at the
White House. Nearly two decades after first
migrating to Washington,
he apparently is still calling the shots of
US
financial and economic policy with the full
support of President Barack Obama. Working
through his favorite marionettes, Treasury Secretary
Tim Geithner and Economic Policy Czar Larry
Summers, most recently Rubin managed the
defense of Wall Street following the great crisis.
No matter what Secretary Geithner says or when
he says it in public, you can be sure that those
utterances have the full knowledge and approval
of his handler Larry Summers and their common
political owner and sponsor, Robert Rubin."
The key question for global investors in USTreasurys
and US corporate bond & equity
positions center upon issues related to policies
that pit the urgent need for fiscal discipline
against the desperate need for effective stimulus.
Whalen believes the next crisis probably
involves US interest rates and the USDollar.
In recent months, Rubin has been engaged in
a clumsy walk that hardly balances the responsibility
of federal deficits against the importance of
preserving the USDollar valuation. Whalen, like
the Jackass, fully believes this former Goldman
Sachs CEO still in the driver seat of the policy
bus, despite a skein of wrecks that have left
many dead. This is the hallmark of USEconomic
policy!

The former genius Rubin effortlessly floats
through the chambers of political and finance,
without leaving a trail of slime. Not burdened
by humility, Rubin once appeared at the right
hand of God (err, Alan Greenspan) on the legendary
February 1999 Time Magazine cover entitled "The
Committee to Save the World" ironically.
It was a cursed warning of later collapse. Rubin
is the Inside Man Extraordinaire, keeping a
cellphone with connections at all times to Goldman
Sachs while serving public office and ransacking
the national wealth. He has had a hand in the
financial regulatory reform resulting in more
entrenchment, less scrutiny. Its end result
is inconvenience for the financial services
industry and more expense for the taxpayer and
the consumer. With his watchful eye and guiding
hand, Wall Street has managed to dodge the worst
effects of public anger at the industry's collective
malfeasance, if not syndicated criminal fraud.
Whalen implies that Obama's victory to secure
the White House post was ensured by the support
of Bob Rubin and Goldman Sachs, likewise his
prospects in 2012. Campaign promises mean nothing
compared to following orders from the presidential
masters in the shadows. See the Zero Hedge article
(CLICK HERE).

◄$$$ ARROGANCE OF THE USFED COMES THROUGH
AS CONTEMPT FOR RATIONAL ECONOMIST ANALYSIS,
DESPITE THEIR OFFICIAL TRAGIC DIRECTION AND
COUNSEL, WHICH HAS LEFT THE U.S. BANKING SYSTEM
INSOLVENT AND THE USECONOMY A WRECK. $$$

Let it be known that US economists are the
most incompetent in the world, compromised by
their fealty to Wall Street and the USDept Treasury,
subservient to the corporate objectives, and
prisoners to fiat money system tied to the debt
risk. Even the education process is corrupted,
by virtue of funding for chairs and foundation
scholarships (fellowships) that tilt and twist
the perceptions toward the system's continuation.
So here we have the USFed bashing its critics,
often coming from the internet (like the Jackass
analyst), as they tell the general public to
ignore anyone who does not possess parchment
in display of an Economics PhD. My personal
bio at the end of public articles was carefully
crafted. It reads "unencumbered by
the limitations of economics credentials"
and that says it all. My education in economics,
mostly self-achievement, avoided the heretic
teachings by professors replete with useless
formulas and absurdly complex diagrams about
Money & Banking (my last course, dropped
before completion). Somehow, university textbooks
in Economics curriculum failed to cover the
current situation of extraordinarily high bank
inventory of foreclosed homes, working opposite
to an extraordinarily strong decline in home
purchase applications, amidst a banking system
heavily dependent upon $100 billion temporary
intermediate credit lines, while the big banks
park their Loan Loss Reserves at the USFed,
and the USFed struggles
to avoid repeated powerful Quantitative Easing
programs. Try to read this last sentence
a few times without laughing or crying.

Way back in August 2003, before the launch
of the Hat Trick Letter, a unique article was
crafted by the Jackass, posted on Financial
Sense, which has sinced fallen off the archive
list. Maybe it deserves a new submission as
a formal rebuttal to the hacks at the USFed
itself. Nice idea! The article was entitled
"A STATISTICIAN INDICTMENT OF ECONOMISTS:
12 Counts of Incompetence, Deception, Collusion"
in which the counts were delineated like in
a criminal court procedure. The work was the
result of a few years of personal research and
notes, as my statistics training left me with
a cold impression of pitiful analysis by the
economics practicioners, who serve more like
front men, paid shills, carnival barkers, and
ideologues. Their employ at any of the groups
where the Jackass worked would be brief and
ugly, with quick dismissal. The indictment listed
12 charges with critical precision:

COUNTS WITHIN INDICTMENT:

1) Ignorance and Revision of History

2) Intellectual Support of an Intervention
Policy

3) Disputable Assumptions used as
Policy Foundation

4) Myopic Statistical Analysis Methods

5) Incomplete Statistical Analysis
System

6) Legislative Divisions to Promote
Political Agendas

7) Institutional Conflict of Interest

8) Distortion in Economic Reporting

9) Pursuit of Public Adulation by
Fed Chairman (Pied Piper)

10) Collusion with Corrupt Financial
Power Elite

11) Deceptive Indoctrination of Economic
Definitions

12) Benign Negligence during Pillage
of National Gold Treasure

Back to the absurd USFed official criticism
and urging. Consider one Kartik Athreya, with
Economics PhD from the University
of Iowa, no slouch
school but only second tier, not Harvard or
Univ of Chicago. This former associate VP at
Citigroup lasted only seven months before sudden
exit, only to land in the back offices at the
USFed. So this snob produced a piece of stupidity
bound in paper, with little awareness of the
USFed track record that has destroyed 98% of
the USdollar purchase value since 1913, and
enables serial killer recessions, culminating
with a systemic breakdown of economics and finance
whose failure is playing out in painful manner.
The shallow diatribe was spotted on a Bruce
Krasting weblog.

Kartik penned an article entitled "Economics
is Hard; Don't Let Bloggers Tell You Otherwise"
which seems lacking as an apologetic piece.
Kartik wrote, "I argue that neither
non-economist bloggers, nor economists who portray
economics, especially macroeconomic policy,
as a simple enterprise with clear conclusions,
are likely to contribute any insight to discussion
of economics and, as a result, should be ignored
by an open-minded lay public... In what follows
I will argue that it is exceedingly unlikely
that these authors have anything interesting
to say about economic policy... Writers who
have not taken a year of PhD coursework in a
decent economics department (and passed their
PhD qualifying exams), cannot meaningfully advance
the discussion on economic policy... The response
of the untrained to the crisis has been startling.
The real issue is that there is an extremely
low likelihood that the speculations of the
untrained, on a topic almost pathologically
riddled by dynamic considerations and feedback
effects, will offer anything new. Moreover,
there is a substantial likelihood that it will
instead offer something incoherent or misleading.
Economics is hard. Really hard. You just will
not believe how vastly hugely mind-boggingly
hard it is. I mean you may think doing the Sunday
Times crossword is difficult, but thats just
peanuts to economics. And because it is so hard,
people should not blithely go shooting their
mouths off about it, and pretending like it
is so easy. In fact, we would all be better
off if we just ignored these clowns."
His cloaked diatribe had motive to discredit
and malign contributors such as Matt Yglesias,
John Stossel, Robert Samuelson, and Robert Reich.
The supposed case made by this blessed adopted
heretic turned out to be four pages of meandering
thoughts that lacked cohesion. See the Zero
Hedge article (CLICK HERE).
My analytic work has often directed attention
to vicious feedback cycles that devastate the
US
financial and economic systems, with apparent
blindness shown by our national crew of economists.
My work has criticized their hack economists
for absurd emphasis paid to sentiment indicators
over proven reliable indicators. They support
the fiat currency system, and thus rely consistently
on controlled indicators (like inflation expectations,
or sentiment indexes) that lack any value in
any worthwhile framework. Their corrupt thought
process is therefore logical.

Kartik Athreya serves as senior economist
for the Richmond Fed, who has come to the stage
to condemn economic contributors on the internet
journals as chronically stupid and a threat
to public order. Wow! What a display of
myopia, incapable of detecting destruction policy
from inside the USFed itself. The Richmond Fed
is one of the least prestigious, by the way.
He implies that matters of economic policy should
be the sole province of the recognized sanctioned
priesthood, which carry the proper doctoral
credentials like pedigree. However, such discrimination
would have excluded David Hume, Adam Smith,
and John Maynard Keynes himself.

Tyler Durden of Zero Hedge pitched in with
a solid powerful rebuttal. He wrote, "The
current generation of economists have led the
world into a catastrophic cul de sac. And if
they think we are safely on the road to recovery,
they still fail to understand what they did.
Central banks were the ultimate authors of
the credit crisis since it is they who set
the price of credit too low, throwing the
whole incentive structure of the capitalist
system out of kilter, and more or less forcing
banks to chase yield and engage in destructive
behaviour. They ran ever-lower real interests
with each cycle, allowed asset bubbles to run
unchecked (Ben Bernanke was the cheerleader
of that particular folly), blamed Anglo-Saxon
over-consumption on excess Asian savings (half
true, but still the silliest cop-out of all
time), and believed in the neanderthal doctrine
of Inflation Targeting. Have they all forgotten
Keynes's cautionary words on the 'Tyranny
of the General Price Level' in the early
1930s? Yes they have. They allowed the M3 money
supply to surge at double-digit rates (16% in
the US
and 11% in Euroland), and are now allowing it
to collapse (minus 5.5% in the US over the last year). Have
they all forgotten the Friedman-Schwartz lessons
on the quantity theory of money? Yes, they have.
Have they forgotten Irving Fisher's "Debt
Deflation Causes of Great Depressions'?
Yes, most of them have. And of course, they
completely failed to see the 2007-2009 crisis
coming, or to respond to it fast enough when
it occurred. The Fed has since made a hash of
Quantitative Easing, largely due to Bernanke's
ideological infatuation with Creditism. QE
has been large enough to horrify everybody (especially
the Chinese) by its sheer size, lifting the
balance sheet to $2.4 trillion, but it has been
carried out in such a way that it does not gain
full traction. This is the worst of both
worlds. So much geopolitical capital wasted
to such modest and distorting effect. The error
was for the Fed to buy the bonds from the banking
system." Wow! That is a comprehensive
rebuttal with power and depth.

My personal rebuttal is this entire newsletter,
motivated by the forecast of a ruined US
banking system, wrecked homeowners, and depleted
pensions, followed by a USTreasury default,
and the thrust of the nation into the Third
World when the USDollar is rejected globally.
The displaced US industrial base stands as such an obvious sign
of failure. My colleague and friend Rob Kirby
has harped on the the original economic policy
crime, driving down the cost of money to artificially
low levels, forcibly keeping it low, pronouncing
victory over inflation, doctoring inflation
statistics, and falsely preaching as to what
inflation constitutes. He calls it the false
cost of usury, which has spawned asset bubbles.
Tyler Durden, Rob Kirby, and the Jackass write
rebuttals from the same page.

YAWNING
USGOVT DEBT & MONETIZATION

◄$$$ USGOVT DEFICITS CONTINUE TO RISE
AT BREAKNECK PACE. ALL NORMS ARE BEING SHATTERED.
TALK OF THE GAPS DOES NOT BRING ABOUT PROPER
ADDRESS. THE DEBT IS A NATIONAL CANCER RUNNING
RAMPANT. LEADERS ARE BLIND TO REMEDY, WHICH
IS CAPITAL FORMATION AND CREATING AN ATTRACTIVE
BUSINESS ENVIRONMENT, ALONG WITH ENDING A PRIVATE
SYNDICATE WAR OVERSEAS THAT BEARS STAGGERING
COSTS WITH THE MAIN BENEFIT BEING SOLDIERS RETURNING
HOME TO DEAL WITH STRESS AND PROSTHETIC LIMBS.
$$$

On the last week of June, history was made,
but with a shameful ring. The national debt
surged $166 billion in a single day last week,
the third largest increase in US history. The event occurred at a time when
the USCongress was in heated dispute and consternation
as to how to reduce spending. They are engaged
in a key policy battleground, but have made
zero moves in reducing the budget, where the
war is still sacred. The one day increase for
June 30th totaled $165,931,038,264 which is
more than the $140 billion in supposed savings
the new Health Care bill is boasted to generate
over its first 10 years. The $166B figure turns
out to be around $1500 for every US
household, equal to 10 times the median daily
household income. It was a bad hair day for
WashingtonDC. All three of the largest single
day debt increases have occurred under the guiding
hand and watchful eye of President Obama. The
overall trend line is heading up up up. The
urgently needed economic stimulus, after the
failed first initiative, has been stalled on
deep concerns over red ink. Just last week,
House Democrats had to use a slick Parliamentary
tactic to pass an emergency bill that included
significant war spending. It is all about priorities.

The war had a false casi de belli (justification),
hidden motives (capture of Iraq's oil supply
and central bank gold), massive slush funds
(pillaged by Halliburton), deep religious violations
(destruction of Askariya Shiite shrine), and
a thick narcotics theme in Afghanistan. Vast
Weapons of Mass Destruction were indeed found
and neutralized inside Iraq, but they were over 99% purchased by Saddam
from the USMilitary during previous administrations
(an item from a military contractor source).
The drain from the war on the USGovt budget,
although sacred, has been catastrophic. The
topic is taboo for discussion, as those who
proffer it have been labeled unpatriotic. Thus
indirectly forced patriotism supports an official
narcotics role. The beneficiaries are private
firms and the syndicate in the $trillions (no
exaggeration).

The heads of President Obama's national debt
commission painted a gloomy debt picture. Republican
Alan Simpson and Democrat Erskine Bowles told
a meeting of the National Governors Assn that
everything needs to be considered, including
curtailing popular tax breaks, such as the home
mortgage deduction, and instituting a financial
trigger mechanism for gaining Medicare coverage.
Simpson, the former Wyoming Senator, and Bowles,
the former White House chief of staff under
Clinton, head an 18-member commission charged
with coming up with a plan by December to reduce
the annual USGovt deficits to 3% of the national
economy by 2015. Simpson stressed how the entirety
of the nation's current discretionary spending
is consumed by the Medicare, Medicaid, and Social
Security programs. Simpson said, "The
rest of the federal government, including fighting
two wars, homeland security, education, art,
culture, you name it, veterans, the whole rest
of the discretionary budget, is being financed
by China and other countries." Bowles summarized
the debt situation well, when he said "This
debt is like a cancer. It is truly going to
destroy the country from within. Just think
about that: All that money [to pay interest
on the debt] going somewhere else, to create
jobs and opportunity somewhere else. What we
do is not so hard to figure out. It is the political
consequences of doing it that makes it really
tough." Their conclusions should be
either ignored or a plank leading to the Third
World. It is a very safe bet that the defense
and war budget are off limits.

◄$$$ ERIC SPROTT DELIVERS HARSH CRITICISM
TO PAUL KRUGMAN, AND CASTS A SUSPICIOUS EYE
AT THE USTREASURYS FOR THE HOUSEHOLD CATEGORY.
IT IS A BLATANT LEDGER ITEM FOR ILLICIT MONETIZATION.
THIS IS A CRIME SCENE, WORTHY OF CLOSE INSPECTION.
SPROTT DIRECTS HIS ACCUSATIONS LIKE A SKILLED
PROSECUTOR. SPROTT REINFORCES THE CLAIM OF PONZI
SCHEME CITED BY BILL GROSS OF PIMCO. $$$

Eric Sprott of Sprott Asset Mgmt delivered
a surgical critique of the USGovt and USFed
concerning its blatant discernible monetization
of debt. A minimum of intelligence is required
to follow the simple arithmetic. He calls the
solution to finance the mammoth USGovt deficits
to be the actual problem. The solution is not
discussed, but rather must be inferred. The
Hat Trick Letter is in perfect synch with his
line of reasoning and accusation, as the "Household"
accounting ledger item is the culprit. Data
in bloody detail is offered in his indictment.
Sprott points out that in order to balance the
budget for fiscal 2009, the USGovt needed to
sell $2041 billion in new debt, equal to three
times the new debt that was issued in fiscal
2008. No purchasing groups could could afford
to increase their 2009 USTreasury purchases
by 200%, a simple conclusion. So by process
of elimination, the monetization source arises
most visibly, but he shows where it appears
in the accounting.

In the latest USDept Treasury Bulletin published
in December 2009, ownership data reveals that
the United
States increased the public
debt by $1.885 trillion dollars in fiscal 2009.
That much is clear. According to this report,
there were three distinct groups that increased
their purchases from 2008 levels. The first
was "Foreign & International Buyers"
which purchased $697.5 billion worth of USTreasury
securities in fiscal 2009, a 23% rise from fiscal
2008. The second group was the US Federal Reserve
itself. Their published balance sheet reveals
an increase in its USTreasury holdings by $286
billion in 2009, a 60% annual rise. Consider
that jump to be a direct result of the official
USFed Quantitative Easing program announced
in March 2009. Quick summaries cover the other
groups. Q1, Q2, and Q3 data from 2009 suggests
that the State & Local Govts and US Savings
Bonds groups were net sellers of USTreasurys
in 2009. Then the pension funds, insurance companies,
and depository institutions increased their
purchases by only a paltry amount. The remainder
was purchased by a category called loosely "Other
Investors" as a catch-all. This other
group purchased $90 billion in 2008, but then
jacked up in extreme hyper-drive its purchases
to $510.1 billion of freshly minted USTreasury
securities so far in the first three quarters
of fiscal 2009. On an annualized rate of
purchase, the catch-all category is on pace
to buy $680 billion of USTreasurys this year,
over seven times the 2008 level.
So the murky vague "Other Investors"
saved the day and financed a gargantuan amount
of the USGovt deficit.

Go to the source. The USDept Treasury Bulletin
identifies "Other Investors" as consisting
of Individuals, Government Sponsored Enterprises
(GSE, as in Fannie Mae & Freddie Mac et
al), Brokers & Dealers (who sell as intermediaries),
Bank Personal Trusts & Estates, Corporate
& Non-Corporate Businesses, Individuals,
and Other Investors. It is far-fetched to
believe parties in these groups had $700 spare
billion to invest in the USTreasury market in
fiscal 2009. Sprott dug deeper, like a surgeon
looking for an abscess full of puss. The Federal
Reserve Board of Governors Flow of Funds Data
provides a detailed breakdown of the owners
of USTreasury securities to 3Q2009. Within these
parties, the GSE group acted as small buyers
of a mere $5 billion this year. Brokers &
Dealers were sellers of $80 billion. Commercial
Banks were buyers of $80 billion. Corporate
& Non-Corporate Businesses collectively
were buyers of $11.6 billion. Add these cited
parties to arrive at a net purchase of only
$16.6 billion. The huge increase of purchases
in 2009 came solely from one source within the
"Other Investors" group. It is defined
in the Federal Reserve Flow of Funds Report
as the infamous "Household Sector"
which is a grab bag catch-all miscellaneous
ledger item. The Hat Trick Letter has honed
in on this corrupted ledger item in past reports.
This category purchased $15 billion worth
of USTreasurys in 2008, then jumped with jet
(printing press) assist in 3Q2009 to a staggering
$528.7 billion in purchases, a 35-fold increase.
The Household is on track to buy $704 billion
worth in all fiscal 2009. Hold onto your seat.
By the end October 2009, the "Household"
accounting category owned more USTreasurys than
the US Federal Reserve itself. That is correct.
Monetized USTreasury bonds account for more
than what the USFed holds. SO WHERE EXACTLY
ARE THE USTBONDS HELD???

The bulk buyers of the $1885 billion in USTreasurys
through Q3 of 2009 were:

To say this makes little sense is a grotesque
under-statement. The pensions, banks, brokers,
and corporations are under great stress, one
and all. Sprott points out that this gigantic
"Household" investment was made beyond
the scope of Money Market Funds, Mutual Funds,
Exchange Traded Funds, Life Insurance Companies,
Pension & Retirement funds, and Closed-End
Funds, which all have distinct reporting categories.
The big question is begged.

The Household Sector is actually just a catch-all
category. It represents the miscellaneous buyers
left over who cannot be categorized easily.
In the past, the values for the Household Sector
are calculated as residuals, securities on loan
across groups, even inclusive of rounding error.
To quote directly from the Flow of Funds Guide,
"For example, the amounts of Treasury
securities held by all other sectors, obtained
from asset data reported by the companies or
institutions themselves, are subtracted from
total Treasury securities outstanding, obtained
from the Monthly Treasury Statement of Receipts
& Outlays of the United States Government
and the balance is assigned to the Household
sector."What is the Household Sector?It is a combination of miscellaneous, ledger
adjustments, and blatant monetization.
Sprott calls it a PHANTOM that does not exist,
but serves the purpose to balance the ledger
in the US Federal Reserve Flow of Funds report.
The monetization is no longer hidden. He concludes
that USTreasurys have become one giant Ponzi
scheme. Much remains after the USFed purchased
almost 50% of the new USTreasurys in Q2 and
almost 30% in Q3, under the direction of Quantitative
Easing. The utter failure lies in USTreasury
Bonds issued, unable to attract outside capital
to finance deficits, whether new of rolled over.
The printing press is one of the world's greatest
inventions, for the mass production of books.
The fiat monetarists led by the banking syndicate
have turned the invention on its head, printing
money that like a cancer destroys capital. The
next chapter of history will include books on
how the monetary printing press destroyed the
Western economies. What irony!!

Bill Gross of PIMCO recently disclosed that
the giant bond fund cut holdings of USGovt debt
and raised cash levels to the highest levels
since 2008. His fund is a net USTBon seller
recently. Earlier in 2010 he called the US a 'Ponzi Style Economy.'
The comment barely attracted attention, since
the USTreasurys are considered a queer safe
haven security. All Ponzi schemes eventually
fail under their own weight. The US
version being no different. Foreign USTBond
holders share their worry openly. Zhu Min is
deputy governor of the Peoples Bank of China. In a recent discussion on the global role
of the USDollar, he told an academic audience
that "The world does not have so much
money to buy more USTreasurys. The United
States cannot force foreign
governments to increase their holdings of Treasuries&
Double the holdings? It is definitely impossible."
With foreign sources unwilling or unable
to support USGovt debt, the monetization card
will be used repeatedly and powerfully inside
the desperate US quarters. When the process
is more widely recognized and publicized, the
USDollar will be trashed. It is that simple.

Sprott wrote, "We are now in a situation,
however, where the Fed is printing dollars to
buy Treasurys as a means of faking the Treasury's
ability to attract outside capital. If our research
proves anything, it is that the regular buyers
of US
debt are no longer buying. It amazes us
that the US can successfully issue a record number Treasurys
in this environment without the slightest hiccup
in the market... [The year] 2009 has been witness
to spectacular government intervention in almost
all levels of the economy. This support requires
outside capital to facilitate, and relies heavily
on the US
governments ability to raise money in the debt
market. The fact that the Federal Reserve
and US Treasury cannot identify the second largest
buyer of Treasury securities this year
proves that the traditional buyers are not keeping
pace with the US governments deficit spending. It makes us
wonder if it is all just a Ponzi scheme."He describes in detail the blatant concealed
illicit monetization!

◄$$$ THE USFED HAS STOPPED THE OFFICIAL
MONETIZATION (Q.E.) PROGRAMS. SECRETLY, MUCH
OF THE NEWLY ISSUED USTREASURY DEBT IS BEING
FINANCED BY DRAWING DOWN THE EXCESS RESERVES
OWNED BY BIG BANKS, AS CASH HELD AT THE USFED.
SO BANKS ARE FUNDING THE NEW DEBT, WILLINGLY
OR BY COERCION. $$$

The US Federal Reserve continues to soak up
the bulk of USTreasurys issued. Since the retirement
of the official Quantitative Easing programs
on April 1st, some tell-tale signs are visible
of shenanigans, again playing with the balance
sheets, but not announcing the tactics publicly.
The volume of securities held outright by the
USFed is flat on a net basis. The Emergency
Programs for all intents and purposes are wound
down, inactive. Both are flat. Notice the Supplemental
Liquidity Program (SFP), slowly being drawn
down since January, reduced by $175 billion.
Something must have entered the equation to
continue purchasing USTBonds as new demand.
The easy conclusion is that Excess Cash
Reserves are funding USTreasury Bonds, which
essentially are a gradual removal of the Loan
Loss Reserves of big banks posing as surplus
excess. So big banks, truly insolvent, are
having their cash funds designed for handling
losses removed. Big banks will run naked. The
banks will likely take fewer risks, and lend
even less. Furthermore, the USFed will lose
its most healthy equity, and will be exposed
as bankrupt insolvent. The Excess Reserves helped
to show the USFed as solvent. Whether a deal
was struck with banks to use their cash, or
whether coercion, time will tell.

Reader Don from Zero Hedge weblogs pitched
in with some sterling analysis. Let him summarize
the sleight of hand. He wrote, "The
net printing shown above has come through a
decline in bank Excess Reserves. Whereas
before such declines in Excess Reserves were
met by Fed sterilization through a shrinkage
of the Fed's own balance sheet (for example,
see May - July 2009), nothing of the sort has
happened this time. That money is just being
allowed to enter the system, period. The
next logical question is where the bank lending
that has replaced the Excess Reserves is heading.
Well, we know it is not hitting the consumer
debt market, given the latest Fed reports. Consumer
credit has continued to shrink, and the government
is the only marginal lender. And just 20 days
later, risk assets began falling hard. It seems
doubtful that they are ramping up risky lending
at a time like this. My theory is that the
money has floated into the Treasury market.
A lot of people have wondered how the Treasury
would be able to continue running record deficits
without the Fed buying. Well, we now know that
the banks are picking up a lot of slack
in the lending markets, and they are doing so
in the midst of very dicey market conditions.
Is it that much of a stretch to posit that the
Fed reached an agreement with them whereby the
banks would take over where the Fed left off?"

◄$$$ OBAMA WAS RECKLESS AT THE G-20 MEETING
IN TORONTO,
AS HE URGED EUROPEAN NATIONS TO BE MORE PRUDENT
WITH SPENDING MEASURES. THE USGOVT DOES THE
PRECISE OPPOSITE. IN FACT, SPENDING RESTRAINT
BY EUROPE ACTUALLY WOULD
LEAD TO THEIR WEAKNESS IN THE NEAR TERM, THUS
GIVING A BOOST TO THE USDOLLAR. $$$

Michael Hudson is a hard hitting geopolitical
economic analyst. He criticizes President Obama
for irresponsibility at best and hypocrisy at
worst. While the USGovt has racked up almost
$3 trillion in deficits for the two years running,
Obama urges Europe not
to go too far in its austerity of government
spending. What a travesty! The man implicitly
advises allies in Europe not to force a grand recession and produce an army of unemployed,
but the pathway is from total wreckage of government
fiscal conditions. The source of USGovt deficits
is not so much demographics as interest on debt,
junk loans, funding Black Holes, and massive
financial fraud on Wall Street with their impaired
bonds redeemed at rosy prices. Both asset backed
bonds and sovereign debt bailouts will go bad,
as the economy lacks recuperative powers. Unfortunately,
the tragedy continues since creditors are to
be paid only at the economy's expense. The
economic victim is capital investment, employment,
and social spending. Any interest rate rise
would shatter the budgets altogether, thus the
0% trap will become a permanent fixture. Proper
cost of money is a thing of the past, a major
Keynesian casualty.

The prevailing financial strategy and pathway
is the problem, since it is predatory. Given
a choice between operating the banks to promote
the economy through capital formation, job growth,
and efficient resource allocation, OR running
the economy to benefit the banks, assuring bonuses,
and redeeming failed balance sheets, the US
bankers in full charge of the USGovt always
will choose the latter alternative, taking care
of their own. The Clinton Admin remains a key
portal in my view for the USEconomic destruction,
as Goldman Sachs was invited to manage the USDept
Treasury. The rest is history, the subject of
six years of Hat Trick Letter analysis, documentation,
and chronicles of the unmitigated broadbased
ruin. The Obama Admin has continued the government
of the banks, by the banks, for the banks. He
speaks against austerity since foreigners must
support the wrecked US$-based bonds that clutter
their banks. If the United States is to wreck its finances, then the
Competing Currency War dictates that foreign
nations wreck their finances with equal strokes.

Austerity is a ruse. A half century of failed
IMF austerity plans has imposed on victimized
Third World debtors nothing
but devastation and poverty. Not one single
example of IMF imposed debt restructure via
austere reforms has proved successful, yet this
weapon of economic destruction remains a key
Anglo device to keep emerging nations poor.
Prudent capital formation, efficient resource
allocation, attractive regulatory climate, and
sane debt management are the path to prosperity
is via austerity. After nearly a generation
of nothing but asset bubbles and absurd debt
management, the commonly accepted austerity
is not the path. THE REAL PATH TO PROSPERITY
IS SCRAPPING THE SYSTEM, FORCING OUT THE FIAT
MONETARISTS, DISMISSING THE MILITARY ARCHITECTS,
IMPOSING SOUND MONEY, LIQUIDATING THE BIGGEST
BANKS, AND PERMITTING THOSE IN POWER TO BE PAUPERS
AND PRISON INMATES. A new tax revenue source
could be to visit and taunt bankers in prison,
for a fee. Maybe shoot paper clips at them,
or at least water squirt guns, as symbols of
their accounting fraud and liquidity abuses.

Hudson goes esoteric and abstruse on us with his conclusion. He wrote,
"The ground has been paved for this
attitude by a generation of purging the academic
curriculum of knowledge that there ever was
an alternative economic philosophy to that sponsored
by the rentier Counter Enlightenment. Classical
value and price theory reflected John Lockes
labor theory of property: A person's wealth
should be what he or she creates with their
own labor and enterprise, not by insider dealing
or special privilege. This is why I say
that Europe is dying. If
its trajectory is not changed, the EU must succumb
to a financial coup d'etat rolling back the
past three centuries of Enlightenment social
philosophy. The question is whether a break-up
is now the only way to recover its social democratic
ideals from the banks that have taken over its
central planning organs." See the CounterPunch
article (CLICK HERE). Intense but
sensible in my view. Keep the fruits of one's
own labor, and eliminate insider privilege to
wealth.

◄$$$ ONE OF THE FEW C.N.B.C. REGULARS
OF VALUE OR INTEGRITY IS RICK SANTELLI. HE DELIVERED
ANOTHER NOTABLE RANT ABOUT THE NEED TO STOP
FEDERAL SPENDING. AS A BREATH OF FRESH AIR,
SANTELLI AGREED TO APPEAR AS GUEST TO ERIC KING
ON THE RADIO SHOW OF GROWING FAME. $$$

Another instant Santelli classic hit the airwaves
in late June, which went simply "Stop
Spending, Stop Spending, Stop Spending!!"
in unmistakable English. In a typical commonly
viewed debate on CBNC, another in a series was
stirred about the state of USGovt spending and
taxation. Rick Santelli ranted for nearly a
minute, simply saying to Stop Spending repeatedly.
Network wonk economics reporter Steve Liesman,
whose arguments seem bought & paid for by
the Keynesian Kastle of Klutzes, then mentioned
some official statistics. Santelli erupted.
He usually makes excellent arguments that the
volume of stimulus is nowhere as important as
the quality of stimulus, and quality has been
totally lacking. He has been harping on the
mammoth deficits and their scourge. See the
Business Insider article (CLICK HERE).
The photo of Santelli is how he is common presented.

On a later date, yet another smackdown took
place on the national financial network, which
increasingly features very attractive women,
in the defense of horrible ratings. The inimitable
and irrepressible Rick Santelli attacked all
that is fiat, alongwith its henchmen. Santelli
told Liesman after disgust ran over his countenance,
"Go read some Austrian economist instead
of the funny pages." Liesman, in lame
style, calling on humor since his substance
is so vacuous and vapid, replied "I
am ready to talk about Fred Hayek, John Hayek,
and Selma
Hayek." Not without a ready salvo in
follow-up attack, Santelli fired back a coup
du jour, when he said "Go back to Russia
where you understand the state and the citizen."
The object of his scorn had spent a few years
in Russia
as a correspondent, fluent in their language,
but cannot spot the growing Politburo committee
in the USGovt. The Jackass has always admired
the assets of Selma,
whose name came up. For Selma Hayek lovers,
check out her famous dance on the table top
in the wild vampire movie "From Dusk
Till Dawn" (1996) with George Clooney,
Harvey Keitel, Cheech Marin, and Juliette Lewis
(CLICK HERE or HERE).
Any able bodied man who fails to respond to
that dance has no warm blood coursing through
his veins. Sorry, got off track. Don't blame
me, since Leisman brought her name up. Just
continuing the debate in thorough fashion, as
all angles must be examined. What she possesses
is better than Laffer Curves! Whether she subscribes
to sound money principles needs further research,
like an interview.

In the first few days of July, the CNBC business
news spokesman from the Chicago Pits went on
a prominent radio show. Rick Santelli stepped
away from the floor of the Chicago Board of
Trade to grant King World News listeners an
uninterrupted interview with substance, depth,
and realism that should shock mainstream knuckleheads
and sheeple. Rick joined the CNBC Business News
as on-air editor in June 1999, with several
daily live reports. His comments are always
meaningful, frank, enlightening, and somewhat
entertaining. Occasionally he is not seen for
a few days after loud outbursts against the
failing system. He might receive coaching during
the hiatus. In the King World News interview,
his focus is primarily on interest rates, foreign
exchange, and the Federal Reserve. A veteran
trader and financial executive, Santelli has
much experience and knows that which he speaks,
and he speaks freely. In a past life, he worked
at the Institutional Financial Futures &
Options at Sanwa Futures LLC. In that post,
he served as VP in charge of institutional trading
and hedge accounts for a variety of futures
related products. See the King World News video
broadcast (CLICK HERE).

◄$$$ USCONGRESSIONAL BUDGET OFFICE WARNED
OF A POTENTIAL DEBT DEFAULT IN THE UNITED STATES.
AWARENESS IS GROWING. $$$

The USCongressional Budget Office recently
released its Long-Term Budget Outlook. In it
they deliver more dire warnings on the projected
USGovt debt to date. They cite Health Care
and Social Security as usurping the budget.
They warn of fast rising national debt unless
lawmakers act. CBO Director Douglas Elmendorf
warned, "CBO projects, the aging of
the population and the rising cost of health
care will cause spending on the major mandatory
health care programs and Social Security to
grow from roughly 10% of GDP today to about
16% of GDP 25 years from now, if current laws
are not changed." The cockeyed aspect
pertains to the ludicrous assumptions whereby
USGovt spending on activities such as defense
and a wide variety of domestic programs would
decline to the lowest percentage of GDP since
before World War II. Such is wholly unreasonable
and derived from fantasy. The CBO cobbled arguments
about the federal debt versus GDP that seem
unaware that their 2020 forecast has already
occurred this year. The CBO made some wishy
washy conclusion about long-term changes to
spending and consequent revenue impact, the
potential damage to the USEconomy, the sacrifices
across generation lines, and required adjustment
times. All in all, the CBO painted a scary picture,
even if using coke bottle glasses.

◄$$$ THE POWERZ NEED A DEFLATION SCARE,
BUT ONLY WITH A DECLINE IN GOLD & SILVER
PRICES SIMULTANEOUSLY. THE SCARE WILL OPEN THE
POLITICAL PATHWAY TO ANOTHER HUGE ROUND OF MONETARY
INFLATION, FULLY ENDORSED AND BLESSED. BUT THEY
MUST HAVE ANOTHER SCARE, SINCE OPPOSITION IS
PREVALENT. $$$

Jesse of the Cafe Americain echoes perfectly
the Hat Trick Letter sentiment about the
need to conjure up a frightful event in order
to gain political approval for another massive
monetary inflation initiative. The attitude
to cut spending and to be fiscally responsible
that has swept the USGovt in the last couple
months is about 20 years too late, and totally
out of place, given the degree and depth of
the current crisis. The USEconomy is collapsing.
The US banks are insolvent. It is like ordering an
oil change on a car with a ruined engine, a
missing gas tank, and the driver seated backwards.
Structural defects must be addressed. Again,
the United States has the worst
and most intellectually corrupted economists
in the world. Below, the word 'fascist' is used
in the context of merged corporate & state.
Think Wall Street banks.

Jesse wrote brilliantly, "Bernanke
knows how unpopular he and his fascist institution
are right now after all of the crimes they have
committed in plain view since 2008. As such,
he knows he needs cover for QE2 and that means
some sort of deflationary shock that scares
the masses and makes many clamor for help
like sad, scared little children (we are being
conditioned like animals). This is why I
think the Fed and others have been fine with
the recent market plunge. The only issue for
them is they absolutely need gold, silver, and
other commodities to collapse as well. Bernanke
cannot have the S&P500 at 850 and gold at
1200 and announce QE2. Gold would surge
to new highs and it would look horrible. This
is why so much emphasis is being placed on getting
gold and silver to retreat in a major way via
propaganda pieces and also likely surreptitious
selling behind the scenes. While there has been
a decent pullback, it is nothing close to what
they need and I am particularly impressed with
how well silver is hanging in. I think this
is due to a run on physical silver by investors
and the dearth of government or central bank
stockpiles to sell in the shadows. This is what
I mean by the rats being cornered. So far
they have failed in decimating the precious
metals markets and if they cannot do that in
a deflationary scare then they are in huge trouble.
Of course they will never stop trying because
they are addicted to power and control and will
do almost anything to protect their positions.
I think a key thing to think about now that
we must accept is that they are in a corner,
[soon to make] the next move on the chess board."
See the Cafe Americain article (CLICK HERE).

The USEconomy suffers from both inflation (rising
money supply, rising prices) and deflation (falling
asset values, in particular debt securities)
in a highly unstable situation masked completely
by seemingly tame overall stock indexes, price
inflation indexes, and jobless indexes. Many
asset groups suffer from very wide bid/ask spreads,
as sellers hope for higher prices that do not
exist, while buyers wait for prices to fall
to where they belong, and banks refuse to lend
after risk assessment. Those who find comfort
in the financial market indexes, or economic
indexes, or LIBOR stability are plain dopey,
dumb, and naive who fail to grasp the complexity
of the bizarre mixing bowl in chaos. Much more
disruption comes to the entire system, since
huge sections of the US financial structure need
to deleverage and shed worthless assets from
the books.

◄$$$ USTREASURY BONDS ARE A LETHAL SAFE
HAVEN, A FACT WITH INCREASING RECOGNITION. THE
USTBOND IS THE BIGGEST ASSET BUBBLE IN THE WORLD,
SINCE THE LAST GREAT BUBBLE IN HOUSING &
MORTGAGES. A USTREASURY DEFAULT IS PREDICTED,
A POLITE ONE. SUCH FORECASTS ARE CERTAIN TO
SPLASH ON FINANCIAL PAGES IN THE NEXT COUPLE
YEARS, SINCE THE EVENT IS INEVITABLE. TAKE NOTE
OF THE CHINESE DEBT RATING AGENCY, WHICH MADE
A SPLASH DOWNGRADING USTREASURY DEBT. $$$

The British economic analyst Niall Ferguson
gave a loud public warning placed on a veritable
billboard: USTreasurys are the Pearl Harbor
of Safe Havens, in his words. The Hat
Trick Letter has warned for two years that USTreasurys
offer no safety for funds in flight during the
credit crisis. The sovereign debt crisis in
Europe has not touched the United
States, not even a speck.
Ferguson concisely captures
the risks of a sovereign debt crisis in America. He explains that with the debt load currently
carried by the USGovt, the margin of safety
is very thin. A slight increase in interest
rates would result in an asymmetric increase
in interest payments, highlighted in recent
HTL reports. Ferguson proposes drastic fiscal reforms to bring the USEconomy back
on track, including tax cuts. Most inept economists,
the great majority, conclude tax cuts mean tax
revenue reductions, when the exact opposite
has occurred for decades without their detection.
Ferguson assesses that while a reduction of corporate and income tax
rates coupled with a simplification of the tax
system would undoubtedly spur economic growth,
politicians will probably be reluctant to adopt
such a solution since it is too obvious and
intelligent. Most politician decisions related
to the USEconomy have resulted in its bankruptcy
and insolvent condition. See the Expected Returns
article (CLICK HERE).

Legendary investor Jeff Gundlach believes a
USTreasury default is inevitable, as all paths
lead to such a grave default. He offered a depressing
presentation at a recent Morningstar Investor
Conference. The bond guru and founder of Doubleline
Capital combines debt apocalypse with negative
indicators in the current recession, like the
recognized chronic lethal mortgage crisis, to
conclude America has only three options: Cut
Spending, Print Money with Abandon, or Default
on Debt. He beleives the only realistic outcome
is Default, although he makes the argument that
all three outcomes will likely be present. He
said, "Some type of polite [USTreasury
Bond] default, at a minimum, will happen."
See Jeff Gundlach's Complete Guide To
The Inevitable American Debt Default (CLICK
HERE).
The USGovt will force a default and debt restructure
out of expedience, necessity, and power of the
gun. Something like a 30% debt forgiveness writedown
will be forcibly imposed. After the event, the
USDollar will be trashed globally. The timing
is uncertain, maybe in the next two years, maybe
longer. It depends upon the arrival launch of
a competitor global reserve currency fashioned
of gold-backing. If & when such a gold-backed
reserve currency is launched, then the USTreasury
default should occur within 12 to 18 months,
maybe sooner.

The Currency Wars saw a big dose of lighter
fuel tossed on the fire last week when US sovereign debt suffered a downgrade by China's Dagong Credit Rating
Agency. Consider it a trade war escalation.
Dagong pushed USTreasurys down from number one
in the world, to a distant thirteenth place.
The Chinese rating agency in a stroke stripped
Western nations of AAA status, since the US
debt agencies sit on their corrupted hands.
China's
leading credit rating agency has stripped the
United States,
the United Kingdom,
Germany,
and France of their AAA ratings,
accusing Anglo-Saxon rating competitors of ideological
bias in favor of the West. The Dagong agency
used its first splash into sovereign debt to
establish a bold standard of creditworthiness
around the world, giving much greater weight
to wealth creating capacity and foreign reserves
than Fitch, Standard & Poors, or Moodys.
It makes perfect sense. See the Cafe Americain
article (CLICK HERE)
and the UK Telegraph article (CLICK HERE).

BROAD POWERFUL
HOUSING DECLINE

◄$$$ END OF HOME BUYER TAX CREDIT HAS
RESULTED IN A SUDDEN COLLAPSE OF PENDING SALES.
PRICE ALWAYS OBEYS THE SUPPLY & DEMAND DYNAMICS.
HOME PRICES WILL FALL AGAIN, DESPITE THE PROPAGANDA
OF STABILITY ACHIEVED. STABILITY IS NOT A FUNCTION
OF TIME. $$$

The signed contracts to purchase homes fell
sharply, loudly, and noticeably in May. The
message is clear: the housing recovery is heavily
dependent upon USGovt incentives and subsidies.
In fact the entire USEconomy is dependent on
them. The National Assn of Realtors reported
last week that its seasonally adjusted index
of sales agreements for existing homes dropped
a whopping 30% in May from April, falling to
77.6 from 110.9. The May mark was the lowest
dating back to 2001, an indisputable signal
of resumption to the housing sector bear market.
The index is down 15.9% from May 2009. My forecast
in 2007 was for a two year bear market. My forecast
in 2008 was for a two year bear market. My forecast
in 2009 was for a two year bear market. My forecast
in 2010 is still for a two year bear market.
Notice the steady forecast, which is much more
palatable and acceptable than what the Jackass
was unwilling to state back in 2007, since credibility
is important. The forecast in my head at the
time was: PERMANENT HOUSING BEAR MARKET FOR
THE UNITED STATES, SYSTEMIC FAILURE, AND A CLIMAX
USTREASURY BOND DEFAULT. The continuing nature
of this historically unprecedented housing bear
market has been a steady theme. Supply is huge,
demand is propped, and prices have much to fall.
In fact, since the bear market was interrupted
in 2001 and 2002 by Greenspan, what has come
is a double bear market with risk of permanent
bear market since liquidation is seen not as
an OPTION.

The pending sales index is a critical early
measurement of sales activity due to the 1-2
month lag between a sales contract and a completed
deal. The sharp index decline was broad based,
as pending sales declines ranged from 33.3%
in the South to 20.9% in the West, where much
damage has already been done. Here is the most
important part of the story unfolding. USGovt
tax credits clearly boosted home sales this
spring. First time homebuyers were in line for
a credit of 10% of the purchase price up to
$8000, while homeowners who bought and moved
also could obtain 10% credit up to $6500. The
deadline for participation in the tax credit
was April 30th for a signed sales contract.
While a droop was widely expected upon tax credit
expiration, the large decline was seen as surprising,
even a minor shock. Dan Greenhaus is chief economic
strategist at Miller Tabak. He said, "We
are once again struck by the force of the drop.
There is simply no other way to spin the recent
housing data as anything other than significantly
worse than virtually anyone, including the housing
bears (a group in which we find ourselves) envisioned."
The impact fell on new home sales also, as May
saw a 33% decline to the slowest pace in the
47 years of record keeping. The May decline
was the largest monthly drop on record. The
USCongress threw a hollow bone to the buyers,
with minimal impact. They voted to extend the
June 30th deadline on completed sales until
the end of September. But the provision applies
only to those who successfully met the April
deadline on signed sales contracts.

The Mortgage Brokers Assn reported that demand
last week for loans to purchase US homes slumped to a 13-year
low. Home loan refinance demand also fell hard
despite near record low mortgage rates under
5%. Mortgage loan requests to buy homes declined
3.1% in the week ended July 9th, even after
adjusting for the Independence Day holiday.
They stand at the lowest level since December
1996. Pending home sales and mortgage applications
go hand in hand.

◄$$$ HOUSING PRICES HAVE BEGUN A POWERFUL
SECOND MOVE DOWN IN PRICE. MOMENTUM HAD BEEN
SUSPENDED FOR A FEW MONTHS, BUT NOW RESUMES
THE DOWNWARD PATH. IMPACT WILL BE ENORMOUS.
THE APPRAISAL PROCESS IS KEY TO PUSHING DOWN
PRICES, AS IT RESPONDS TO THE FORECLOSED PROPERTIES
NEARBY. $$$

Barry Ritholtz from The Big Picture is a founder
of investment research firm Fusion IQ. He believes
housing prices are still too high. He expects
them to tank, in his words, as we are on our
way to a second leg down. He states a basic
fact, that home prices are still too high. Even
after a plunge of more than 30% from the 2007
peak to the 2009 trough, house prices still
did not fall to their long-term Fair Value level
based upon incomes and rents of the past century.
Over the next year or so, Ritholtz expects prices
will fall but then stabilize at a level at least
10% lower. In his view, the primary factor to
drive down prices is the unresolved imbalance
between Supply & Demand. The glut is too
large, given the current level of demand. The
affordabilty factor is often trotted out, but
it is irrelevant. Many who might be interested
in buying houses have lost their jobs or are
whittling down huge debt burdens. So demand
is lacking. Also, banks are much more stringent
in loan approvals. Ritholtz points out an
important asterisk to the equation. Normally,
after a bubble, prices return to the mean and
shoot right through it with powerful momentum.
He sees a housing price overshoot again this
time. See the Business Insider article (CLICK
HERE).

A powerful factor in home price determination
is the appraisal process, which is being driven
down by the legions of foreclosed properties.
John Walsh is president and founder of Total
Mortage. He wrote an opinion article for the
National Mortgage Professional Magazine that
detailed the difficulties many homeowners are
having in securing decent appraisal values on
their homes. The huge number of foreclosed
and distressed properties on the market is having
a profound and detrimental effect on the appraisal
process. The typical procedure for an appraiser
to determine the value of a home is to examine
similar comparable homes within one mile of
the target property having sold during the last
six months. The key problem is that in most
cases, too many nearby homes are under distress
or are completed as short sales (seller in negative
equity). Often, these same homes would sell
for a higher price in a more normal market,
but the appraisers cannot make a two-tier system,
one for unusual circumstance, another for normal
mainstream. The sheer magnitude of distressed
properties puts downward pressure on appraisal
values from the tremendous volume involved and
their prevalence. In other cases, a total lack
of comparable home price data complicates the
process, when extremely low volume of home sales
has plagued some areas. Then the appraiser resorts
to a variety of methods to extrapolate the value
of the property, but again arriving at a low
figure. The outcome when appraisals come in
low is expectedly disruptive. The Loan/Value
Ratio rises, thus forcing the lender to purchase
mortgage insurance, or it causes a lender to
reject the finance application altogether, killing
the deal. See the Total Mortgage article (CLICK
HERE).

The bridge between foreclosures and home
prices is clearly the appraisal process, which
eclipses the low cost of loans. Low mortgage
rates seem to matter little anymore, except
to incompetent economists who cannot fully grasp
the different hostile climate. The 30-year fixed
mortgage rate stands at 4.125%, with the fixed
15-year rate at 3.625%, and the Jumbo 30-year
rate at 5.47%, while the official FHA rate is
4.00% on the 30-year mortgage. Notice how the
cheap loan factor has become irrelevant. Banks
are reluctant, even as buyers are crippled.

◄$$$ CANADIAN HOUSING PRICES HAVE NOT
COME DOWN LIKE IN THE UNITED STATES, BUT THAT
IS CHANGING. SUPPORT FROM COMMODITY STRONGHOLDS
AND EVEN OLYMPIC PILLARS CANNOT MAINTAIN PRICES.
CANADA
HAS SEEN ITS PEAK, AS DEMAND HAS TUMBLED IN
KEY AREAS. $$$

The Globe & Mail has reported that home
sales in Vancouver and Calgary
have dropped sharply. The Real Estate Board
of Greater Vancouver
reported last week that home sales fell 30.2%
in June. Supply is on the rise, as new property
listings rose 1.2% from May and 32% from a year
earlier. In the next province eastward, the
Calgary Real Estate Board reported sales of single
family homes fell 16% in June from the previous
month and 42% from June of 2009. Calgary
also reported that condo sales fell 14% from
a month earlier and 40% from a year earlier.
In a seeming contradiction, sales of high-end
properties over $1 million in value are on the
rise, according to the board. Board president
Diane Scott summarized, saying "We are
seeing continued moderation in Calgary's
home sales in the face of higher mortgage rates,
increased inventory levels and a decreasing
number of first-time home buyers entering the
market." The pathogenesis has been
established, the decline process beginning with
a major slowdown in demand. The Canadian housing
aberration, one to match that in the United
States, has begun on the
long road downward. Its collapse is not assured,
since unlike the US,
it has significant commodity wealth to serve
indirectly as collateral. In Canada, the top on the housing
market is set and done, written in stone. The
degree of ultimate decline is uncertain. See
the Global Economic Analysis article (CLICK
HERE).

Mike Shedlock effectively lays out the pathogenesis
of decline. Some elements might occur simultaneously,
or in a different order, but the great unwind
process begins with a notable plummet in volume.
Here is the pattern of events in what he calls
the Housing Collapse Cascade Pattern:

Volume drops precipitously

Prices soften a bit

Inventory levels rise slowly

High-end home prices remain relatively steady
for a brief while longer

The real estate industry tries to convince
everyone it's 'Business as Usual' and homes
are affordable because rates are low

◄$$$ HIGH END VACATION HOME PRICES IN
THE UNITED STATES HAVE RESUMED WITH A SHARP
DECLINE. THEY SERVE AS A GOOD WINDSOCK INDICATOR
OF RESUMED DECLINE, SINCE DISCRETIONARY. $$$

Luxury vacation home sales have faded with
the absent USEconomic recovery. After an early
2010 rebound, sales are evaporating like a lakefront
fog and beachside mist. People are moving to
the sidelines, watching and waiting to see if
a Double Dip recession takes root, and thus
have stepped back from discretionary property
purchases for mountain retreats, beach bungalows,
and country spreads. Demand for expensive vacation
homes is especially sensitive to economic weakness
because it is not driven by a need for shelter.
Demand for homes in chic tony resort towns surged
in the first three months of 2010, according
to local counts. Sales in the Hamptons
on Long Island New York more than doubled in 1Q2010 versus a year ago, according to
Miller Samuel Inc, a New
York property appraiser. In Aspen
Colorado, transactions
rose a robust 43%, according to Mason Morse
Real Estate. In the absence of activity in the
Q2, prices have come down across the board while
property listings sit idle.

Pent-up demand and skittishness probably explain
the first quarter surge. Wealthy buyers had
delayed purchases during the financial meltdown
that accelerated in 2008, so claims a broker
in Osterville Massachusetts
from Cape Cod. He cited
demand for homes in 2009 priced over $1 million
as the lowest in his 28 years of selling seaside
properties. He said, "The financial
services people we worked with at the beginning
of the year were feeling a lot more confident
in their futures and in their bonuses than they
were in 2009. Now, there is concern about the
financial markets and the world economy."
The investment bankers and mutual fund managers
from Boston and New
York must have bitten the stupid bait on the
Green Shoots nonsense and now the Jobless Recovery
klapptrapp deceptions. Analysts point out how
lower rates matter less when qualification standards
rule the lending decision process. Another impediment
to vacation homes is the 40% down payment many
lenders require for jumbo mortgages on second
homes. Keith Gumbinger is a VP at HSH Assoc,
a mortgage data company in New
Jersey. He said, "Vacation homes, especially
luxury ones, have always carried more risk for
lenders because if you have a catastrophic event
like a job loss, the mortgage on your second
home is going to be the first bill you do not
pay. To get financing, you have to put more
skin in the game." Furthermore, wealthy
buyers will hesitate to make the larger down
payments even when they can, if they are worried
about income and job security. The money represents
savings rednered unavailable and tied up. After
all, it is discretionary spending that reflects
feeling confident about the future. See the
Bloomberg article (CLICK HERE).

◄$$$ CONDO PRICES IN MANY MARKETS HAVE
BEEN CUT IN HALF, LEAVING MANY CONDO OWNERS
FROZEN SOLID. THE CONDO NEIGHBOR SALES DETERMINE
LOWER PRICES FOR ALL, ESPECIALLY WHEN GROUPS
OF UNITS ARE SOLD AT DISCOUNT. A CASCADE OF
LOST VALUE IS BEING REALIZED. $$$

Bulk condo condominium sales reveal a strong
property price collapse, much worse than decline.
Stubborn condo owners are refusing to sell since
they do not accept low offered prices, not seen
as fair. Such decisions put them eventually
into deeper negative equity. The condo market
is dealing with harsh reality. Often owner sellers
define fair to mean equal to or higher than
their original purchase price. Their holdout
mentality backfires in this harsh market. Many
people are learning the difficult news on value,
even without selling. Bulk condominium sales
of foreclosed units often clear at 50% discounts
to original prices. Auction sales tend to
be brutal, as part of foreclosures for individuals,
even bankruptcies for condo complex owners.
In some cases, the clearing price is below construction
cost. Mass sales can help establish a bottom
for the market, small comfort for those saddled
with losses of equity. Often the bottom may
be far lower than many current owners realize.
See the Business Insider article (CLICK HERE).

◄$$$ COMMERCIAL PROPERTY DEFAULTS ARE
HORRENDOUS AND GROWING EXPONENTIALLY, DRAGGED
DOWN BY THE ECONOMIC RECESSION AND NATURAL REJECTION
OF THE CONSUMPTION MODEL. WHILE RESIDENTIAL
HOMEOWNERS ARE UNDERWATER AND GROWING WORSE.
$$$

The residential real estate market is well
documented as a disaster, with foreclosures
(FC) in cancer mode, banks holding FC inventory,
and 25 million Americans occupy homes worth
less than their loan balance. The main question
hovers like a black cloud, whether commercial
real estate will follow the same path. My forecast
is obviously yes, since it historically does,
the same forces at work, and economic conditions
in tatters. The USEconomy growth from 2002 to
2006 was built upon the housing bubble and mortgage
fraud expansion. My forecast in 2007 and 2008
called for near total destruction of the US banking system, an endless
housing bear market, and grotesque homeowner
foreclosures amidst rampant insolvency, all
of which occurred. The commercial property market
cannot rebound in such an adverse climate. The
real estate market has morphed into a weighty
beast that is largely sinking the overall economy
into quicksand. Combine the commercial real
estate market ($3.5 trillion debt) with residential
outstanding mortgages ($10.3 trillion debt)
to arrive at a figure that approximates the
annual GDP of the United States. Next compound the risk with huge
unresolved leverage found in the real estate
market financial underpinnings.

Many loans are headed to default, yet banks
maintain them on the balance sheet without resolution,
expecting an eventual convergence with par value.
This is fantasy. Dr Housing Bubble puts it well,
claiming a real estate Frankenstein was created
that has a mind focused on the perverse notion
that it actually constitutes the economy. Commercial
real estate (CRE) is the next tragic chapter
in the bursting bubble, a process well along.
Its prices have already fallen by 42%. At
peak just three years ago, commercial RE values
in the US
reached $6.0 to $6.5 trillion. Today, CRE values
are down closer to $3 to $3.5 trillion, a figure
almost equal to the volume of CRE loans outstanding.
The powerful decline has caused a skein of defaults
across the land. Any further price decline will
mean the CRE sector is underwater insolvent
in an aggregate sense.

The exponential rise in delinquency rates is
troublesome for political and syndicate reasons.
Almost no political will exists to bail out
the enormous commercial market. Wall Street
does not own their debt, PERIOD. Bank failures
have increasingly been tied in recent months
to commercial portfolio exposure, as much as
residential. Many small and regional banks have
sizeable CRE debt, having turned sour. Somehow
the public and the politicians see no need to
save the shopping mall phenomenon, or the fast
food craze, or the Big Box retail trend, or
the over-built office park theme. The failure
of the CRE sector reflects the perverse USEconomy
trend directed at over-consumption. It will
not receive bailouts. Banks simply are refusing
to approve many loans, including the commercial
type. Furthermore, banks using USGovt supplied
funds must adhere to stricter lending rules.
The commonality with both commercial and residential
loans screams of crisis, desperation, and ruin.
It is negative equity, which no lender will
touch in a refinance. Banks prefer to extend
terms of the loans, rather than sending them
to default. So the properties rot in place!

Over 20 million mortgages in the US
are underwater. Harken back a few years ago,
when Deutsche Bank estimated that at the ultimate
trough of the housing market, nearly half of
all mortgages would be underwater. Bear in mind
that not all homes have mortgage obligations
attached. The DBank opinion was ridiculed as
farfetched. Just 10% more in a US housing price
decline would bring about the half-way mark
of insolvency. New drowning households are added
every month to the disastrous figure, as over
7 million are one payment behind or in foreclosure.
See the July 7th segment of Dr Housing Bubble
(CLICK HERE).

A simple Jackass Axiom: As long as
bankers delay the credit asset liquidations,
the property market decline will remain firmly
in place and stuck. So if bankers never force
the cleansing of their impaired assets and distressed
portfolios, the housing bear market will continue,
even permanently. The commercial real estate
(CRE) market has avoided a disaster to date,
but its reckoning is assured and guaranteed.
The practice is known as Extend & Pretend,
where banks pretend the loans will be paid in
full at a later date, and thus extend terms
so as to avoid a painful termination of the
loan in foreclosure. In good times, normal times,
the practice is a Win-Win situation after a
sector revival. But in the current troubled
ruinous times, the practice results in much
deeper losses for both the bank and the borrower.
Banks are on the hook for extraordinary losses,
even eventual bankruptcy. The restructure process
has turned out to be a revolving door of denial
and ruin that does nothing to halt downward
momentum. Today's borrowers are not temporarily
strapped, but rather chronically distressed
and often facing ruin. Worse, the banks are
deeply committed to fraudulent accounting. Often
they are dead but standing as zombies. The financial
health they claim in quarterly reports come
from exercises in a fictional version of their
twisted reality.

The value of CRE has fallen 42% from the peak,
with no recovery. Meanwhile, the commercial
tenants in occupancy (office buildings, hotels,
retail outlets, distribution centers, shopping
malls, small businesses) have removed over 8
million jobs. Consumers have cut back. Retail
activity is reduced. Businesses generally have
shed payrolls. Debt burdens are broadly borne.
Since the USEconomic is so troubled, demand
for commercial real estate seems clearly not
to recovery to 2007 levels in the near future.
Yet banks extend the loans with grace, or desperation,
even fantasy.Restructurings of non-residential
loans totaled $23.9 billion at the end of 1Q2010,
triple the level a year ago and seven-fold over
the level two years ago. Banks hold $176
billion of impaired CRE loans, according to
Foresight Analytics. Two thirds of bank held
CRE loans scheduled to mature by 2014 are underwater,
as in loan greater than value, as in negative
equity. In 1Q2010, among the CRE loans held
by banks, 9.1% were delinquent, compared with
7% a year ago and a mere 1.5% in 1Q2007, according
to Foresight. That is a six-fold rise in three
years, and steady march in the last year. A
steady degradation is taking place in the commercial
arena, exactly as forecasted.

Imagine a large investment firm purchased a
$100 million shopping mall in 2007, financed
it with $10 million of original equity but $90
million of bank loan funds. The mall fell in
value to $58 million. The loan is coming due,
but the loan is $32 million more than its value.
No bank will refinance in a rollover, NONE!
Even with a $20 million down payment, the loan
would be $22 million over current value. The
flip side is these same investment firms CANNOT
sell the property, since they would have to
produce the $22 to $32 million in cash at closing.
Banks choose not to foreclose, since doing so
would first force a painful loss, and second
would force EVEN LOWER PRICES from the liquidation
process. What often happens is, as a result
of the mutual quagmire of distress, the bank
extends the repayment date of the loan to 2020,
and the borrower continues to make interest
payments. On the crippled bank books, the
loan is marked as performing, but the bank knows
of the balance sheet unrealized loss, and will
curtail further lending. Parallel to zombie
homeowners with negative equity, are zombie
commercial owners with negative equity. These
zombie businesses do not hire, do not expand,
and struggle to survive when in reality they
are dead. The Extend & Pretend actually
harms the banks in the future, since the loss
would be less if suffered today, bigger tomorrow.
The disaster is well in place, the dynamics
unshakable, future chapters having been written,
with only the scenes played. See the Business
Insider article (CLICK HERE).

◄$$$ OFFICE VACANCY SURGED IN THE LAST
THREE YEARS, AND HAS NOT RELENTED. RECORD HIGHS
ARE SET SEQUENTIALLY. THE 2003 PEAK HAS BEEN
BREACHED. $$$

Deterioration of the property market is universal.
The US office vacancy rate reached a 17-year high.
REIS, the commercial property consultancy,
reports the office vacancy rate rose to 17.4%
in 2Q2010, up from 17.3% in Q1 and up from 16.0%
in 1Q2009. A consistent office vacancy rate
hovers above the previous 16.9% recession high.
Effective rents, a term used to measure the
amount tenants actually pay landlords (apart
from non-payments), declined 5.7% from a year
earlier and 0.9% from the previous three months,
according to REIS. The rate of increases has
slowed, small comfort. See the Calculated Risk
article (CLICK HERE).

◄$$$ FLORIDA
HOME SALES ARE DOMINATED BY FORECLOSURES. THIS
DEVELOPMENT IS BEFORE THE GULF OIL VOLCANO SPEWED
TARBALLS ONTO THE GORGEOUS FLORIDA BEACHES.
NEXT COMES TOXIC RAIN INLAND. $$$

Sales of foreclosed homes in Florida comprised
almost 40% of all home purchases in the first
part of 2010, a terrifying statistic in
the words of one analyst. The end result is
deeply discounted prices on distressed properties.
It was worse in Miami-Dade
County, where foreclosure
type sales made up 47% of all homes sales in
the first five months of 2010, according to
RealtyTrac. In Broward
County, 46% of all
homes sales involved distressed properties.
For contrast, consider that under 1% of Florida home sales in 2005 were of foreclosed properties,
RealtyTrac determined. See the Miami Herald
article (CLICK HERE).
LeBron James forgot to do his economic background
check before he signed with the Miami Heat professional
basketball team. The Miami
economy is in a powerful downward spiral, even
before the gigantic Gulf of Mexico oil spew. Cleveland might have air
pollution, but Miami
might soon have toxic rain. Let's see if the
Heat play their games next season in Miami.

◄$$$ THE PROPORTION OF HOME MORTGAGES
IN DELINQUENCY IS STAGGERING AND GROWING. THE
WORST OFFENDERS ARE FLORIDA
AND NEVADA. $$$

Over 12% of all existing US-based home mortgages
are delinquent or in foreclosure, a staggering
figure that cannot adequate convey the hardship
and pain. Lender Processing Services reports
that mortgage delinquencies continue to rise
substantially. The mortgage delinquency
rate in May increased to 9.2% nationally, up
from 6.9% in April. Furthermore, the nationwide
foreclosure rate for the month of May
is 3.2%, a full bore assault. Thus a hefty
12.2% of mortgages are delinquent or in foreclosure.
Florida and Nevada continue
in their national leadership positions, with
22.4% and 21.8% respectively in the combined
tally. Without data, let it be known that the
Cure Rate of DQ loans, moving to current status
in payment, is declining. The USGovt programs
are a sham to capture attention, to claim federal
responsive action, but they accomplish nothing.
The motive by Wall Steet is NOT to disrupt mortgage
bond values, since scrutiny might result in
examination of their structures. The average
number of times a given home mortgage income
stream is claimed in a distinct mortgage bond
is over three, according to some expert estimates.
When people cannot catch up to mortgage payments,
they become second class economic participants
going through the motions, often certain of
their demise in foreclosure or bankrutpcy. The
national database of bank held titles on home
loans is a travesty of fraud. See the Total
Mortgage article (CLICK HERE).

◄$$$ THE MORTGAGE FRAUD INDUSTRY SUFFERED
ANOTHER MAJOR LEGAL BLOW. THE PROPERTY TITLE
DATABASE AGAIN WAS GIVEN ZERO LEGAL STANDING,
WHICH RENDERS NULL THE RIGHTS TO ASSIGN A TRANSFERRED
MORTGAGE. HENCE, HOMEOWNERS CAN FLAUNT THE BANKS
AND NOT PAY, WITHOUT RISK OF BEING KICKED OUT
OF THEIR HOMES. THE PRESS NETWORKS, SUBSERVIENT
TO BIG BANKS, HAD BETTER KEEP VERY QUIET THIS
TREND IN LEGAL DECISIONS. THE PUBLIC IS DOING
STRATEGIC DEFAULTS, AND SIMPLY DEFYING BANKS
ON AN INCREASING BASIS. $$$

The potential for successful civil disobedience
has never been more ripe. When smaller states
out of the spotlight take action, like Kansas,
publicity might circulate, but it does not have
the impact like when California or New York
make a landmark decision with all its attendant
bright lights and exposure. The US Bankruptcy
Court for the Eastern District of California
has ruled that MERS cannot transfer a note (home
loan mortgage) for want of ownership. In the
May decision in California, the Bayrock Mortgage Corp and Citibank lost their case,
once again MERS being the point of legal vulnerability.
MERS is the Mortgage Electronic Registration
Systems devised by corrupt Wall Street maestros
that is backfiring in their faces. It was
originally designed to track the property titles,
put them in a national database, and facilitate
the brisk sales between parties of mortgage
bonds tied to those titles that guarantee the
income stream from monthly loan payments. The
Wall Street fraud kings and the Fannie Mae sewage
managers thought concentrated order could aid
their cause, when instead the courts have ruled
consistently that MERS has no legal standing
and cannot serve as the lever that removes a
person from the home via foreclosure. MERS
holds the titles, but MERS has no legal standing
to transfer the home loans in the foreclosure
process. The importance of the string of
negative court decisions (State Supreme Courts)
is significant in permitting home mortgage owners
to defy the banks, not make the monthly payments,
and remain in their homes without fear of foreclosure
and removal. The main people who are abandoning
their homes, either volunatarily or succumbing
to pressure, are those people ignorant of the
law. Below some key passages are taken directly
from the interpretation by attorney Jeff Barnes.
See his website for general information on the
Foreclosure Defense Nationwide (CLICK HERE).
See this crucial story by Barnes that exposes
a legal hole that obstructs the banks from foreclosures
in many cases (CLICK HERE).

The BK
Court ruled specifically: "Any attempt
to transfer the beneficial interest of a trust
deed without ownership of the underlying note
IS VOID UNDER CALIFORNIA LAW." This conclusion was based upon California
law cited in the opinion that the note and the
mortgage are inseparable, with the former being
essential while the latter is an incident, and
that an assignment of the note carries the mortgage
with it, "while an assignment of the
latter [the mortgage] alone is a nullity."
As MERS must own the note in order to assign
the incident deed of trust, MERS is legally
precluded from assigning the deed of trust for
want of ownership of the note, and cannot
assign the note in any event as it never owned
it.

Barnes continued. This opinion thus serves
as a legal basis to challenge any foreclosure
in California based on a MERS assignment; to
seek to void any MERS assignment of the Deed
of Trust or the note to a third party for purposes
of foreclosure; and should be sufficient for
a borrower to not only obtain a TRO against
a Trustee Sale, but also a Preliminary Injunction
barring any sale pending any litigation filed
by the borrower challenging a foreclosure based
on a MERS assignment.

Barnes continued. This ruling is more than
significant not only for California borrowers,
but for borrowers nationwide, as this California
court made it a point to cite non-bankruptcy
cases as to the lack of authority of MERS in
its opinion. Further, this opinion is consistent
with the prior rulings of the Idaho and Nevada
Bankruptcy courts on the same issue, that being
the lack of authority for MERS to transfer the
note as it never owned it (and cannot, per MERS
own contract which provides that MERS agrees
not to assert any rights to mortgage loans or
properties mortgaged thereby).

Colleague Craig McC pitched in, after following
this case in his home state. He has experience
in homebuilding and insurance, familiar with
legalese. He wrote, "The mortgage securitization
mess just suffered another major blow this week
in CA. Any mortgage transferred or assigned
via MERS appears to have questionable value
since the acquiring party cannot foreclose.
Will Citi and others be required to adjust their
balance sheets accordingly? Will acquirers of
such mortgages sue the originators for fraud?"
The door is wide open for national civil disobedience
directed against the predatory banks.

BROKEN USECONOMY
WITHOUT CRUTCHES

◄$$$ THE NEW BREAD LINE IS FROM JOB FAIRS,
WHERE UNEMPLOYED WORKERS MUST BECOME THE BREADWINNER
AGAIN, FROM WHICH FAMILIES SURVIVE. CONDITIONS
TO OBTAIN JOBS ARE WRETCHED, BOTH IN THE UNITED
STATES AND ENGLAND. THE ABLE BODIED MIDDLE AGED AMONG THE
POPULATION ARE BEING SHUT OUT. $$$

Beware the new Modern Day Bread Lines.
They seek a job, not a meal! The new urban version
of bread lines is from job fairs, where unemployed
workers seek to become the breadwinner again,
a desperate struggle for families to survive
and to avoid disenfranchisement. People queue
for a job fair in New
York in the above photo. The share of the US population at
working age with jobs in June fell from 58.7%
to 58.5%, a big drop from 63% just three years
ago. The USDept Labor cites 79 million men
in America between the ages of 25 and 65 years, with
nearly 18 million of them (22%) out of work
completely. The rate in the 1950 decade
was under 10%. With eight million jobs losts,
and multitudes dropping out of the workforce
from utter discouragement, the pool of workers
on the Labor Disabled List ready to quickly
re-enter the labor force is at a historical
high, the potential competition. That includes
those working part-time since they cannot find
full-time work. In such an environment, employers
can keep wages down, be highly selective, offer
minimal fringe benefits, and be patient for
the right fit.

Dean Baker is an economist at the Center for
Economic & Policy Research. His research
suggests a growing number of men, especially
in disadvantaged, urban, and minority neighborhoods,
have vanished from the statistical rolls altogether.
Worse still, US workers, lacking the math
& science skills from remedial education
systems, find themselves without the requisite
skills. Americans mock the Chinese for low
wages and long work hours, but Asians generally
bring to the table far deeper math & science
skills. Jeff Weninger of Harris Private Bank,
said "Legions of individuals have been
left with stale skills, little prospect of finding
meaningful work, and benefits that are being
exhausted. By our math the crop of people who
are unemployed but not receiving a check amounts
to 9.2 million [people]." The USEconomy
is caught in the vicious tight pull of a recession.
It is not responding to badly applied stimulus.
It is trapped from a monetary straitjacket governed
by 0% but unavailable credit, a shrill signal
of a broken credit market.

LABOR CONDITIONS ARE NO BETTER IN ENGLAND. University graduates
face the most intense scramble in a decade to
secure a job this summer. A survey of UK
employers reveals a shocking statistic, as applicants
per job vacancy has surged to nearly 70:1 ratio,
this while the available positions is estimated
to have fallen by nearly 7%. The class of 2010
has been told to lower expectations, as leading
corporations in investment banking, law practice,
telecomm, and information systems plan to sharply
reduce graduate entry level jobs this year.
Competition in the jobs market is more fierce
than last year, when the applicants to jobs
carried a 48:1 ratio. The Assn of Graduate Recruiters
polled over 200 firms such as Cadbury, Marks
& Spencer, JPMorgan, and Vodafone and found
the number of applications per vacancy had risen
to 68.8 this year, the highest figure on record.
The key to achieving personal career goals is
flexibility, the willingness to accept different
job offerings. Unfortunately, the world is already
loaded of taxi drivers, restaurant waiters,
fast food flippers, and temporary staff. The
labor market reflects the human tragedy by vanishing
opportunity. See the UK Guardian article (CLICK
HERE).

◄$$$ JOBS GROWTH IS PHONY. BUT EVEN THE
PHONY STORY IS LOSING ITS MOMENTUM. BY FAR THE
OUTCOME OF THIS SUPPOSED RECOVERY IS THE MOST
PATHETIC, WEAK, FEEBLE, AND DISTORTED IN HISTORY.
WITHOUT USGOVT PROPS AND NUTTY PROGRAMS, NO
LIFT WHATSOEVER WOULD HAVE OCCURRED. MY REASONING
IS THAT NO RECOVERY WAS PLANNED OR ATTEMPTED,
OBVIOUSLY NOT EXECUTED, THEREFORE NOT REALIZED.
$$$

They say the USEconomic recovery is losing
steam and lacks gusto. My view is it lacks
the necessary conviction for recovery, nor any
remote semblance of reform or restructure from
which to recover. The 'Hand to Mouth"
mindset of cash grants to sustain consumer spending
is mindless, juvenile, and a failed concept.
The 'Consumerism' is a dodo bird unworthy of
preserving, a pox on American History. The 'FIRE'
Economy built largely upon housing bubble is
a gigantic travesty that predictably sent the
nation into ruin from every conceivable aspect.
The 'War Emphasis' for five decades has twisted
the priorities of the nation, focused on destruction
instead of production. The 'Exported Industrial
Base' theme that started with the Pacific Rim
(including Japan) in the 1980 decade
and culminated in the Chinese industrial 'Low
Cost Solution' in the early 2000 decade was
icing on the flat cake. The end result is that
the United States has a tiny industrial
base, dead banks, too many insolvent households,
and tremendous labor market insecurity. At least
the nation has endless war and the associated
intimidation of nations as a sick asterisk.

The USEconomic recovery has lost significant
steam in the last few months. What actually
has happened is that the USGovt has pulled most
props, like car buying incentives, home buying
incentives, even jobless insurance extensions.
The nationalizations of dead firms, corrupt
to the core, constituted the height of investment
in failure and fraud. The recovery stories have
been nothing but lies built upon hollow rafts,
just like the so-called home loan remodification
programs. The Gulf of Mexico
tar beaches is the last pox. Employment results
are the most visible, still bereft with clumsy
deceptions. Jobless claims are the most difficult
to doctor and distort. The June Non-Farm Jobs
Report came in lousy again, supposedly +83k,
but clearly the beneficiary of Census hiring
that will vanish quickly. They official story
tells of a monthly average of 119k new jobs
formed in April, May, and June. However, contrast
that nonsensical story with the Birth-Death
Model fiction, which produced from the statistics
lab +188k, +215k, and +147k jobs from an absurd
ARIMA model with zero basis. The B-D Model
contributions averaged +183k per month. Scratch
all these modeled fabrications to see a net
loss of jobs per month. The job losses are much
worse than officially declared, while even the
graph of the recovery from hemorrhage does not
look so good.

This non-existent economic recovery is the
worst almost in US
history. Again, it bears repeating, that
no bank reform, no systemic restructure, no
regulatory overhaul, no credit asset liquidation,
no removal of credit derivative cancer sores,
no substantive home loan aid, no stripped power
from the responsible fraud kings on Wall Street,
no removal of Goldman Sachs from the USDept
Treasury lead post, nothing was executed. These
items are the mere start of any road to recovery.
Thus the breakdown has proceeded over time without
interruption, while the same vacant failed economic
counsel is followed. But faith in the bankers
has vanished among the helpless public, whose
cries at Tea Parties are slowly being accused
of fomenting terrorism. Eichmann and Goebbels
would be proud. An extraordinary case of national
financial constipation and economic consternation
has taken root. My claim of gradual deterioration
of the USEconomy is becoming more apparent with
each passing month. This recession has almost
no visible recovery. Its depth is worse than
any on record. Its recovery is the slowest on
record also. My view is that the nation is enduring
a systemic cycle, not a business cycle, not
a credit cycle. The financial engineering products
show innovation but killed the host. The credit
cycle has been totally halted. The central bank
franchise system is discredited and an utter
failure. The system is need of replacement.
Both the European economy and the USEconomy
scream that message.

By the way, constant unrelenting talk about
a Double Dip recession is the most firm assurance
that it is in progress. Otherwise, why bring
up the topic? It is much like constant unrelenting
talk about whether Uncle Ernie is an alcoholic.
The question does not come up unless plenty
of evidence surrounds us. The prevalent topic
is proof, as a bad stink. Also, note the steady
stream of worthless 3.0% GDP growth forecasts
for later this year or next year, and forecasts
for an economic recovery in the second half
of 2010. Both views are worthless. When in doubt,
forecast 3% growth. When clueless, forecast
a recovery in the second half. A full decade
of such complete BullShxx should have taught
people this by now. Two bright lights must be
monitored of favorable type. Both Cisco Systems
(computer networks and telecomm) and Intel (computer
chips for processors and memory) announced highly
successful quarters, in fact record quarters
that shared promising views on enterprise sales.
These are two bellwether firms.

◄$$$ JOBLESS CLAIMS STUBBORNLY MAINTAIN
ABOVE THE 450K WEEKLY LEVEL, SHOWING NO IMPROVEMENT.
THE END TO EMERGENCY UNEMPLOYMENT COVERAGE ACTS
AS SALT ON THE WOUNDS. AN UPTREND IN JOBLESS
CLAIMS IS IN THE MAKING. $$$

Jobless claims for the week of July 1st were
horrible, coming in at 472 thousand. The previous
week logged a sizeable 459k claims. Extended
benefits and the federally sponsored emergency
EUC extensions fell hard by 158k and 217k respectively.
One might conclude that the USEconomy has entered
a freefall zone with government blessing, if
not neglect. The absent insured basic income
above will render the monthly loss by $5 billion
per month. Annualized the toll will be a cool
$60 billion to income and a nearly equal sum
to consumption. Declines were seen for continuing
claims, down 224k in the June 26th week to 4.413
million for the lowest level since November.
Declines instead reflect a pittance of new hiring
but mainly the expiration of benefits by federal
action. Notice the slight uptrend since January
of this year. The cutoff of federal extensions
to 99 weeks will put 1.3 million Americans in
dire straits, as they lose their jobless benefits.
Some economists estimate the impact to the USEconomy
from the cold shoulder to be 0.5% shrinkage,
ignoring various downstream multiplier effects.
Even the official doctored tampered distorted
unemployment rate U3 is due to spike by nearly
1% toward the 10.5% level. See the Zero Hedge
article (CLICK HERE).

◄$$$ FACTORY ORDERS AND DURABLE GOODS
ORDER SLUMP AFTER A SKEIN OF INCREASES, BUT
THIS DATA IS DIFFICULT TO READ. $$$

May factory orders fell by 1.4% to snap an
eight month streak, an unwelcome surprise. New
orders for manufactured goods in May decreased
$5.8 billion to $413.2 billion, as per the US
Census Bureau release. Excluding the volatile
transportation, the decrease was 0.6% in new
orders. The murky GDP lift from inventory ramp-
ups has hit a plateau. Inventories, down following
four consecutive monthly increases, decreased
a mere $2.0 billion (0.4%) to $520.4 billion.
As Tyler Durden adds, "Little one can
add here. This is merely the latest crumb on
the path in the search for the full blown Double
Dip Depression." See the Zero Hedge
article (CLICK HERE).

The more targeted durable goods order deserves
mention. The May figure was down 1.1% generally.
However, the non-defense ex-transportation figure,
commonly regarded as the CAPEX (capital expenditures)
for business rose 2.1% in May. The April CAPEX
was down 2.4% after a 6.5% rise in March. This
series is not steady at all. So the business
investment climate appears unclear, if not uncertain.
One data point that seems to cast a dark shadow
over this sector is the industrial capacity
utilization, which has fallen from 70% to 65%
in recent months, a level typical of extreme
recession.

◄$$$ CONSUMER CREDIT IS DOWN HARD SINCE
JANUARY 2008 WHEN A RECESSION WAS RECOGNIZED.
EVIDENCE OF RECOVERY IS NOWHERE. THE USECONOMY
IS BY FAR THE MOST DEPENDENT UPON CREDIT FLOW
IN THE WORLD, THE CORE NATURE OF PONZIS. SUCH
DECLINES HAVE NOT BEEN WITNESSED IN OVER 40
YEARS. $$$

◄$$$ CONSUMER BANKRUPTCIES ARE NEARING
RECORD LEVELS. THEY CONTINUE TO RISE FROM LAST
YEAR. THEY REFLECT THE LABOR MARKET AND FORECLOSURE
STORIES. $$$

Consumer bankruptcy filings have reached their
highest point since 2005. Through the first
six months of 2010, consumer bankruptcy (BK)
filings increased to 770,117 which is 14% more
than filings made over the same period last
year, according to the American Bankruptcy
Institute. The pace has slowed a little, but
still the growth is notable in trend. On a sequential
basis, the June figures show the third straight
month of BK decline, hardly a plus. Bankruptcy
filings totaled 127 thousand in June, down more
than 7% from May. The June 2010 level of
BK filings was more than 8% higher than a year
ago, according to the National
Bankruptcy Research Center.
The American Bankruptcy Institute forecasts
an additional 1.6 million BK filings by the
end of this calendar year. The dominant regions
for BK filings were the Southwest and Southeast.
Just like with foreclosures, the state of Nevada is a national leader in bankruptcy. Alaska, WashingtonDC, and South Carolina had the lowest BK filing rates, a full 40% below the
national average. Tennessee
and Alabama
also have lower BK filing rates, as they were
more observers of the housing bubble. See the
Wall Street Journal weblog (CLICK HERE).

◄$$$ STEP ASIDE CALIFORNIA,
AS ILLINOIS TAKES THE FRONT STAGE ON THE STATE COLLAPSE SHOWCASE. ILLINOIS
IS A WELFARE STATE THAT RECEIVES LITTLE PUBLICITY
AS SUCH. $$$

Illinois faces an ugly balance sheet, one that features massive cash
shortfalls and overdue payments. Comptroller
Daniel Hynes said, "This [$5.01 billion]
is what the state owes right now to schools,
rehabilitation centers, child care, the state
university. It is getting worse every single
day. This is not some esoteric budget issue.
We are not paying bills for absolutely essential
services. That is obscene." For the
last few years, California stood out as the showcase for fiscal collapse among states,
lunatic spending, and welfare excess. Illinois has pushed to share the center stage. The two states have
a trait in common, extreme dysfunctional political
bodies that refuse to enact the difficult steps
to address shortfalls. Illinois must make
spending cuts and force tax hikes, if it is
to close a $12 billion deficit, equal to monstrous
50% the state budget. The Land
of Lincoln has stopped
paying its bills, but cannot stop digging a
deeper hole. See the New York Times article
(CLICK HERE).

Colleague Craig McC commented from Northern
California, saying "We have over 32
states already insolvent, having to borrow from
the Federal government to pay unemployment benefits.
It is only a matter of months before the states
start defaulting on their obligations or the
federal government have to bail them out. States
are prohibited by law from going bankrupt."
Massive state job layoffs from essential services
as well as discretionary projects are going
to be slashed nationwide, making the labor market
even worse, if that is possible. This is a national
economic deterioration situation. Chronic throngs
of jobless is a Third World
characteristic.

◄$$$ MIAMI MUNICIPAL
DEBT IS DOWNGRADED, WHILE STATEWIDE FLORIDA
HAS NUMEROUS MUNIS UNDER THREAT OF DEFAULT.
FLORIDA
MUNIS ARE A TOTAL WRECK ZONE. WAIT ANOTHER YEAR
FOR THE B.P. OIL MESS TO DELIVER ITS HARMFUL
IMPACT TO THE STATE. $$$

Moodys Investors Service has downgraded to
A2 rating with negative outlook the sale of
$105 million Special Obligation Parking Revenue
Bonds, Series 2010A (tax-exempt) and Series
2010B (taxable) from the Marlins Stadium Project,
pertaining to Miami Florida. Moodys has downgraded
$35 million in Miami
ULT Notes to A1 from Aa3, and downgraded $235
million in LT Notes to A3 from A2, posting a
negative outlook to boot. This is all before
the impact of the Gulf of Mexico oil volcano strikes the economy via the shoreline, with
the BP oil caught in the loop current. Miami is stuck in a jam, with reduced reserves and greater budget pressures,
while no recovery plan seems viable. The real
estate bust has had a colossal impact on South
Florida, in fact all of the Sunshine
State. Tax revenues are down huge. Bankruptcies and canceled projects
litter the landscape. See the Zero Hedge article
for a blizzard of details and debt agency finance
speak (CLICK HERE).

The Florida Trend reports on the state of affairs
for municipal bonds in the Sunshine State. This is an unmitigated indescribable disaster. Imagine how much
worse it becomes with the full impact of the
British Petroleum contributions to the economy,
after hotel reservation cancelations are factored
in and coastal tourism ceases. The ruin of finance
hidden from view will soon be matched by ruin
of beaches in visible fashion. Expect even an
unintended impact to Orlando,
with no coastline, as the image of Florida
generally is trashed. The report stated, "As
of May, Florida had 125 districts in default
on more than $3 billion in bonds, the single
biggest muni bond default wave in at least 30
years," says Richard Lehmann, a
Forbes columnist and publisher of Miami Lakes-based
Distressed Debt Securities. He says another
70 districts are teetering toward default. Troubled
Florida community development districts became
such a hot topic that last year he launched
a website (www.FloridaCDDReport.com) just to
track them. Another firm, Bedford Mass-based
Interactive Data, says $2.4 billion, or more
than 40%, of the $5.6 billion in dirt bonds
it monitors, failed to make interest payments
in November or had to draw against reserves
to do so. The majority of the bonds were issued
from 2004 to 2007 toward projects across all
Florida, with a pocket
of concentration in the Tampa
area, one quarter of them. See the Florida Trend
article (CLICK HERE).

◄$$$ THE STATE OF TEXAS
IS IN DEEP TROUBLE ALSO. THE LONE STAR
STATE IS HARDLY A BASTION
OF LIBERALISM AND WELFARE SOCIETY. ITS DISTRESS
SHOULD CHANGE THE PERCEPTION OF STATE BUDGET
SHORTFALLS AS DIRECT EFFECTS OF ECONOMIC DETERIORATION.
$$$

The more liberal states of California,
Illinois, and New York can
always be blamed for running huge welfare programs
and other liberal devotions to free spending.
Last year when these and other states burdened
by questionable unproductive spending programs
ran into big trouble, other states saw themselves
as different. California has captured much of the state budget disaster news, with
its massive cuts and lunatic legislative rules
that obstruct decisions from being made. Take
Texas,
which commonly is regarded to be chockfull of
major deep wells of income sources, like oil
& gas, even some new wind farms. The two
states share more similar budget deficits nowadays.
In Texas,
the $18 billion estimated shortfall comprises
about 20% of state spending. In California, the $19.1 billion estimated shortfall
comprises about 20% of state spending. Some
key differences exist, favoring the Lone Star
state. Texas has a better credit rating,
and it possesses $9 billion in the bank in a
reserves fund. It has not had to order any
major budget cuts yet either, which will enable
some easy fat to be identified. Time will eventually
come when Texas makes the news with cuts to some essential
services, maybe even to some sacred areas. See
the Business Insider article (CLICK HERE).